Stronger dollar shouldn’t hit inflation

Date:

(Updates with dollar appreciation, additional comments from minister)

SANTIAGO, Aug 7 (Reuters) – Diverging monetary policies between Chile and the United States are responsible for the recent weakening of the peso, Chile’s top finance official said Monday, but he stressed that a rising U.S. dollar should not fan local inflation.

Since late last month, Chile’s central bank has begun to ease its monetary policy with interest rate cuts, while U.S. policymakers have mostly opted for boosting rates.

At a press conference in the capital Santiago, Finance Minister Mario Marcel also argued that consumer prices are not directly linked to the currency swings.

“(Diverging policies) over time will produce a higher dollar-peso correlation, and that’s a correlation that will moderate with the passage of time, and it won’t have a significant impact on inflation since it’s associated with external factors,” Marcel told reporters.

Chile cut its interest rate to 10.25% while the U.S. Federal Reserve hiked rates at the end of July and could raise rates again in September.

The U.S. dollar has strengthened around 3.5% versus the Chilean peso since the South American country lowered rates.

The dollar’s recent gains are unlikely to sway the country’s monetary policy, Marcel added. (Reporting by Fabian Cambero; Writing by Kylie Madry; Editing by David Alire Garcia)

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