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1/2/09

Chile, interest rates, inflation, Bachelet and the central bank

Bachelet proves she can maintain her composure and smile
even in the most difficult of circumstances

President Bachelet gave a very interesting interview to Chile's Radio Cooperativo on Wednesday. Part of the show was devoted to the question of interest rates, as the analytical world and their spouses all say that Chile's central bank is about to cut the rate by 0.5% (it's currently at 8.25%) in order to stimulate growth (or so the theory goes). Anyhow, here are a few direct quotes from Bachelet in that interview after being subjected to the OttoTrans™:

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"Inflation is in full retreat and I understand that this will be a criteria that the Central Bank is going to evaluate when defining its interest rates policy.....this is what I hope for, although I am respectful of the Central Bank's autonomy, but I believe that the numbers we're seeing augur well for some good decisions."

"The only good news at the moment, from the point of view of economic future is that expectations and estimates of the experts say we are going to end 2009, some say, with inflation at 2.6%. We ended ths year (2008) at 7.5%."

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It's not just Chile, of course. The whole region is now benefitting from the drop in prices (just check the Peru PPI figure in yesterday's chart, for one example). The countries of South America are net commodity exporters thus the drop in world commods prices is a net negative. However there is most definitely a silver lining to the cloud, and that silver lining is the easing of inflationary pressures.

So as growth was the strong point pumped by every regional government in 2005 to 2008 ("Growth!! Growth!! Look at how we're growing and don't worry about the inflation number, it's not that important anyway...now vote for me, suckaz") so the inflation rates regionwide will be the Presidential talking point of 2009 ("We have the important inflation figure under control. don't worry about growth, that will come back quickly enough because I'm wonderful and smart and have controlled inflation...now vote for me, suckaz").


In the words of Kurt Vonnegut, "So it goes.".