Friday, 13 March 2009

Chile Delivers Another Massive Rate Reduction; Currency Should Rally Slightly

The Banco Central de Chile, commanded by economist José de Gregorio, delivered a 250 basis point cut in the benchmark overnight lending rate to 2.25 percent (in line with market forecasts.) That is what a responsible country does when it has the firepower to do it, namely fiscal ammunition, low debt, etc. This is the third rate reduction this year -- 100 basis points in January, 250 basis points in February, and 250 basis points this month.

We have been insisting on markets' preference for countries with an aggressive package of anti-recession policies. We have seen how well the Brazilian real and the Chilean peso fared compared to the Colombian and Mexican pesos (and we insisit these two countries were late to act against the crisis.) The Chilean peso has gained momentum in recent weeks, following the announcement of a $4 billion fiscal stimulus package at the end of last year. One important thing to highlight here is that the Chile has more fiscal room to implement counter cyclical policies than Brazil. The peso therefore might rise to levels close to 580 to the dollar, from 594 pesos now.

1 comment:

  1. Mr Guillermo Parra-Bernal :

    Since you mention Colombia and Korea in your Main Page then I decided to post about the Videos of Hearings in the U. S. House of Representatives related to Free Trade Agreements of the USA with these two nations and Panama.

    I collect the Videos of U. S. Congress Heasings about Trade with Colombia, Korea and Panama.

    House Ways and Means Committee - Hearings with the Treasure Secretary Tim Geithner.

    House Representative Dave Reichert, Republican from Washington State.

    Dave Reichert is a friend of Free Trade and is concerned about Excessive Protectionism from the Present Administration

    Reichert Presses Treasury Secretary Timothy Geithner on Free Trade, Bailout Accountability and Tax Hikes - Trade with Colombia, Korea and Panama

    March 3, 2009

    Reichert Presses Treasury Secretary Geithner on Free Trade, Bailout Accountability and Tax Hikes

    Reichert worried about the Economy of his Washington State Constituency. He asks for Free Trade. Geithner is elusive but it seems like a Change is in the air for Democrats and Trade.

    See various videos House Representative Gregory Meeks of Queens, New York, discussing Trade and a change of position of the Obama Administration.

    Gregory Meeks, Democrat, House Representative from Queens, New York
    Member of the House Financial Services Committee
    Meeks chairs the Subcommittee on International Monetary Policy and Trade
    Member of the House International Relations Committee

    Elected in 1998, Congressman Meeks has been re-elected four times by an overwhelming mandate by the people of New York’s 6th congressional district and enjoys a reputation as a consensus builder.

    I am sure that you will enjoy the videos :

    Vicente Duque