As a result of the various locations, the Central Bank spoke out against the escalation that the dollar has been registering in recent days in the country, assuring that it is monitoring the situation and that “if necessary” measures will be implemented.
As reported by Emol, through a statement, the entity chaired by Rossana Costa, delivered the details of the aggressive depreciation of the Chilean peso, which accumulates a “loss of value close to 20% since the beginning of the year.”
In that sense, the BC indicated that “this in turn has shown episodes of unusually high volatility in recent days.” It should be noted that in the last two sessions alone, the dollar has climbed $45 in the local market, closing the day at a new all-time high of $992.
“Situations such as the one described are of special concern, since they could obstruct the formation of exchange market prices and stress the evolution of other sectors of the financial market, which, as on other occasions, would require the intervention of the Bank in order to ensure the proper functioning of the economy,” said the Central Bank.
“For this reason, the Issuing Institute has been comprehensively monitoring the evolution of the markets and has maintained permanent communication with the other economic authorities. The assessment indicates that so far the markets have been able to absorb shocks adequately and that volatility in the foreign exchange market has not been transferred to other segments of the financial system, those that have operated with adequate levels of liquidity,” he added.
Faced with the deterioration in the external scenario and the greater exchange rate volatility, the entity maintained that “the fixed income markets at different terms have functioned normally and short-term liquidity in the money markets in pesos and dollars has remained at adequate levels. This contrasts with what happened in other episodes of intense exchange rate tensions, such as in October 2019 and March 2020, when exchange rate pressure was combined with a strong tension in the functioning of financial markets in general.”
In the same vein, he pointed out that “the factors that have strained the foreign exchange market will continue to be present, and will continue with the monitoring of this situation. If necessary, it will implement the corresponding measures to ensure the normal functioning of internal and external payments.”
In the same statement, the Central Bank detailed that “in recent days, the Chilean economy, like other economies in the world, has faced external shocks of great intensity.” The above, in the midst of a scenario where local uncertainty has remained high. “In this context, the peso has depreciated significantly and its volatility has increased significantly.”
In addition, he explained that as a result of the high inflation that plagues the world, it has caused various central banks to intensify the effective pace, highlighting the case of the United States. “The reaction of international financial markets has been intense, and there is currently a greater probability of a global recession,” he emphasized.
“Higher interest rates in the U.S., along with the U.S. dollar’s role as a safe-haven currency, have pushed the U.S. currency to its most appreciated level since 2002,” the bank said. “Fears of a weaker global scenario have driven down international food and energy prices, from the high levels triggered by the Russia-Ukraine conflict. Additionally, the price of copper has fallen by about 20% since the beginning of June, which has been much higher than that of other commodities, which has generated a deterioration in the terms of trade of our economy,” he said.
Fiscal policy “is part of a path of convergence consistent with the long-term conditions of the economy. However, the significant current account deficit, high inflation and levels of local uncertainty have increased the economy’s sensitivity to external shocks,” the governing body said.
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