Chile’s Central Bank on Its Surprise Cut: 'You Had Been Warned'

Chile’s Central Bank may have stunned the market on Friday with a half-point key interest rate cut, but the June quarterly monetary policy report, known locally as the IPoM, showed the move was in the cards all along.

"As you may recall from our presentation in March, we tied lower inflation to the possibility of bigger slack in capacity due to strong immigration in recent years and lower transfer from exchange rate variations to prices," the central bank said in its report published Monday on its website. In March the bank had also warned that parameters like the neutral interest rate, potential GDP, and output gap would be revised in June to reflect weaker-than-expected growth. And last month it also said it had discussed cutting rates, according to the minutes of that meeting.