Chile Government Taps Banco Santander Economist Claudio Soto for Central Bank Board

(Bloomberg) -- Chile’s government nominated Banco Santander economist Claudio Soto for a spot on the central bank’s monetary policy board as pressure mounts on the bank to speed up interest rate cuts.

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The former chief macroeconomic adviser at the Finance Ministry and onetime manager of the macroeconomic analysis department at the central bank will replace the outgoing Vice President Pablo Garcia, Finance Minister Mario Marcel told reporters in Santiago Tuesday. The appointment must now be approved by lawmakers.

“He’s a person who gives us complete security in the contribution that he can provide to the central bank board given his experience and knowledge, especially in macroeconomics,” Marcel said.

Policymakers may speed up the pace of rate cuts as early as this month after consumer prices posted the biggest monthly decline in over a decade in December as both demand and economic growth stagnated. The central bank has already lowered borrowing costs by three percentage points to 8.25%, and traders see rates tumbling to 4.25% in a year’s time. Recent decisions by the five-member board have been unanimous and the new member is unlikely change the balance of power.

Read more: Chile Consumer Prices Post Biggest Monthly Drop Since 2013

Chile’s annual inflation rate now stands at 3.9%, down over ten percentage points from the three-decade high of 14.1% recorded in August, 2022. Central bankers see consumer price growth back at their 3% target in the second half of the year, though many private sector economists predict it will happen earlier.

December’s inflation figures “opened the door for an even larger rate cut of 100 bps at this month’s meeting,” Andres Pardo, head of Latin America Macro Strategy at XP Inc., wrote in a note.

In recent weeks, central bank President Rosanna Costa has said it’s important to solidify advances made in bringing inflation toward target without inflicting unnecessary costs on the economy.

Chile’s gross domestic product will expand as much as 2.25% in 2024, according to central bank projections published in December.

(Updates with Mario Marcel comments in third paragraph. A prior version corrected the year in final paragraph)

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