A coming tightening in monetary policy, after years of lower interest rates to stimulate growth, is good news for Chile and shows the economy is stable, according to the head of the Central Bank.
At its monthly policy meeting, the central bank maintained its benchmark interest rate at a historic low of 1.75, but said the moment was near when borrowing would be made more expensive because inflation is starting to rise.
But some lawmakers have warned a rate increase now would slam the brakes on growth and ruin the chances of creating more jobs. The unemployment rate has remained stubbornly high, despite the fact Chile's economy is this year heading for its biggest expansion since 1997.
"The normalisation of rates is good news, because the economy is in a normal expansion cycle ... and to continue in that cycle we need to control inflation," said Central Bank President Vittorio Corbo.
The Central Bank has not increased rates since March 2000.
