Chile Central Bank Nominee Urges Vigilance Over Slowdown
Chile´s central bank and government must remain vigilant to prevent the global slowdown from undercutting the country’s economy, even as domestic demand remains resilient, central bank board nominee Joaquin Vial said.
“Chile´s situation today effectively is very favorable,” Vial said hours before his confirmation vote in the Senate in Valparaiso. Yet, “times like those we´re seeing today that are particularly good are when the government and central bank must exercise maximum vigilance.”
The Senate will vote this afternoon on Vial´s nomination to take the place on the board of former central bank President Jose De Gregorio, who stepped down in December. De Gregorio was replaced as bank president by board member Rodrigo Vergara.
If approved, Vial would be in place as the fifth board member by the next interest-rate decision on Feb. 14. Unemployment unexpectedly fell in the fourth quarter, while retail sales rose more than expected in December, casting doubt on whether authorities need to take steps to stimulate growth this year, Deputy Finance Minister Julio Dittborn told reporters in Valparaiso today.
“The country truly is showing great capacity to grow,” Dittborn said before meeting with the Senate Finance Committee. “It doesn´t seem we may need a contingency plan. Obviously, things could change.”
Battery of Programs
The contingency plan would entail implementing “a battery” of programs designed to boost investment and protect jobs, Dittborn said.
Policy makers unexpectedly reduced borrowing costs this month for the first time since 2009, even after inflation reached 4.4 percent, breaching the central bank target of 2 percent to 4 percent.
“In the latest monetary policy report, we estimated that a somewhat more expansive monetary policy may be needed to accommodate and decrease the negative impact foreseen from the external scenario,” Vergara told Senators today. “The 25 basis point reduction in the monetary policy that we decided upon in the last meeting is in line with that.”
Unemployment dropped to 6.6 percent in the fourth quarter, while retail sales grew 10.1 percent in December from the previous year, the National Statistics Institute said in separate reports this week.
Vial has a doctorate in economics from the University of Pennsylvania and was budget director in the government of President Eduardo Frei Ruiz-Tagle from 1997 to 2000. He was later chairman of BBVA’s Chilean pension fund AFP Provida SA, where he oversaw about $40 billion in assets.
“Joaquin Vial is a professional with an outstanding background,” Finance Minister Felipe Larrain told reporters Jan. 19. “He is an independent professional with all the characteristics needed to make an enormous contribution to the central bank board.”
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