Rosanna Costa: Monetary policy in Chile - a look behind and beyond

Speech by Ms Rosanna Costa, Governor of the Central Bank of Chile, at the Chile Day, London, 10 September 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good afternoon, it is a pleasure to be with you today, in this new version of Chile Day.

The Central Bank of Chile has the mandate to keep inflation low and stable. To achieve its objectives, for more than 20 years the Bank has been conducting its monetary policy under the medium-term inflation targeting scheme with a flexible exchange rate. During this time, we have seen how the Bank has successfully overcome important challenges, generating confidence and credibility in its policies, as well as high institutional strength and value.

A look behind our Monetary Policy in a challenging context 

The last few years have been particularly challenging for our country and for the Central Bank's policy framework. But they have also given us the chance to demonstrate its validity and strength not only to the public more involved in economic and financial issues, but also to the Chilean society at large. Our institution played a relevant role in reining in the effects on the financial markets after the social outbreak, in generating support measures to mitigate the effects of the pandemic and then in controlling the inflationary shock we experienced as a result of the excessive increase in domestic spending and a series of external factors. Today, we can say that monetary policy has done its job, stabilizing the economy and bringing inflation around its target. As a result, we are facing a different cycle. I will refer to all this in more detail later on.

To put these statements in context, I would like to begin this presentation by describing the developments of our economy in recent years. Thus, it is worthwhile to dwell on the different types of shocks that have hit us, bearing in mind that their nature was unusual, that they required ad-hoc monetary policy responses and that the policy framework was flexible enough for an adequate conduct of monetary policy.