Central Bank of Chile

The Central Bank of Chile (Spanish: Banco Central de Chile) is the central bank of Chile. It was established in 1925 and is incorporated into the current Chilean Constitution as an autonomous institution of constitutional rank. Its monetary policy is currently guided by an inflation targeting regime.

Central Bank of Chile
Banco Central de Chile
Official logo of the Central Bank of Chile
Official logo of the Central Bank of Chile
Front view of the Central Bank of Chile building
Front view of the Central Bank of Chile building
HeadquartersAgustinas 1180, Santiago, Chile
EstablishedAugust 22, 1925
Ownership100% state ownership[1]
PresidentRosanna Costa
Central bank ofChile
CurrencyChilean peso
CLP (ISO 4217)
Reserves51,3 billion USD (December 2022) [2]
Interest rate target11,25% (October 12, 2022)
Websitewww.bcentral.cl

History

Starting in the mid-19th century, private banks started to thrive in Chile, spurring growing concerns over the control of payment methods and persistent inflation. To this end, the government hired a mission led by economics professor Edwin Kemmerer of Princeton University and based the nascent central bank's structure in one of the mission proposals. In August 1925, the Central Bank of Chile (CBoC) was created through Decree Law 486, which also established the bank's monopoly for issuing bank notes under a gold standard regime. A degree of independence to avoid capture by the public or private sectors was implicit in its ten-member board structure.[3][4]

Inflation, however, did not recede. Moreover, it was further heightened by a weak institutional framework. Inflation would only be controlled after the introduction of autonomy of constitutional rank in 1989.[3]

Institutional framework
Board of Central Bank of Chile. March 2022.
Central Bank President José de Gregorio Rebeco presenting the new $5,000 bill in 2009.

The CBoC is granted autonomous status by Chile's National Constitution, in order to secure independence from national authorities, providing credibility and stability beyond the political cycle.[4][5] According to the Basic Constitutional Act of the Central Bank of Chile (Law 18,840), its main objectives are to safeguard "the stability of the currency and the normal functioning of internal and external payments".[6] Therefore, the CBoC needs to control inflation to foster a stable currency, while the payment system's normality requires functional financial intermediation, the provision of payment services and adequate risk allocation. To meet these objectives, the CBoC is enabled to use monetary and foreign exchange policy instruments, along with some discretion on financial and capital markets regulation.[5]

The CBoC is governed by a Board composed of five members appointed by the president, but ratified by the senate. Each term is ten years long and members are chosen in a staggered way every two years. The president appoints the Governor of the Board (and the bank) from existing members, for the minimum between the chosen member's remaining term and five years. At least three members need to be present for the board to operate and measures are adopted with the support of the majority of present members. The Minister of Finance also participates in board meetings with the right to speak and, unless there is full consensus among board members, can suspend board resolutions for 15 days.[4][5]

Policies

The CBoC is Chile's monetary authority and its monetary policy is guided by an inflation targeting regime, which is fully in place since 1999. Specifically, the CBoC pursues an inflation target of 3%, with a tolerance range of 1% (above or below), with the objective of anchoring market expectations in a two-year horizon.[5] Decisions on the monetary policy rate (MPR), the reference interest rate for the economy, usually take place on a monthly basis in the monetary policy meetings, although extraordinary meetings can be called. If inflation expectations are diverging from the 3% target or if there are events since the previous meeting with an anticipated effect in the price level, the CBoC might change the MPR. The monetary policy is carried out through the daily interbank interest rate.[5] Inflation has followed a relatively stable trajectory since the inception of the targeting regime, remaining under 10% ever since; yearly inflation only surpassed the tolerability threshold of 4% in 2007 and 2008, with respective readings of 4.4% and 8.7% in historical terms.[7]

The foreign exchange policy is led by a floating exchange rate, although the bank reserves the right to intervene in the foreign exchange markets. Although unusual, the CBoC has used announced interventions on four occasions since 1999, when the economy transitioned to a floating exchange rate scheme, all of which were sterilized. Twice, in August 2001 and in October 2002, the central bank intervened to deter a depreciation,[5] while the remaining two events, announced in April 2008 and January 2011, were aimed at strengthening the international reserves position of the bank through daily and pre-announced dollar purchases.[8][9]

List of governors
Picture Name Entered office Exited office Notes
Ismael Tocornal Tocornal 1926 † October 6, 1929 [10]
Emiliano Figueroa 1929 1931 [10]
centro Francisco Garcés Gana 1931 1932 [10]
Armando Jaramillo Valderrama 1932 1933 [10]
Guillermo Subercaseaux Pérez 1933 1939 [10]
centro Marcial Mora Miranda 1939 1940 [10]
Enrique Oyarzún Mondaca 1940 1946 [10]
centro Manuel Trucco Franzani 1946 1951 [10]
Arturo Maschke Tornero 1953 1959 [10]
Eduardo Figueroa Geisse 1959 1961 [10]
Luis Mackenna Shiell 1962 1964 [10]
Sergio Molina Silva 1964 1967 [10]
Carlos Massad Abud 1967 1970 [10]
Alfonso Inostroza Cuevas 1970 1973 [10]
Carlos Matus Romo June 2, 1973 September 10, 1973 [10]
Eduardo Cano Quijada 1973 1975 [10]
Pablo Baraona Urzúa 1975 1976 [10]
Alvaro Bardón Muñoz 1977 1981 [10]
Sergio de la Cuadra Fabres 1981 1982 [10]
Miguel Kast Rist April 23, 1982 September 2, 1982 [10]
Carlos Cáceres Contreras September 3, 1982 1983 [10]
Hernán Felipe Errázuriz Correa 1983 1984 [10]
Francisco Ibáñez Barceló 1984 1985 [10]
Enrique Seguel Morel 1985 April 3, 1989 [10]
Manuel Concha Martínez April 3, 1989 December 9, 1989 [10]
Andrés Bianchi Larre December 10, 1989 December 2, 1991 [10]
Roberto Zahler Mayanz December 3, 1991 June 30, 1996 [10]
Carlos Massad Abud July 1, 1996 2003 [10]
Vittorio Corbo Lioi 2003 2007 [10]
José de Gregorio Rebeco 2007 2011 [10]
Rodrigo Vergara 2011 2016 [10]
Mario Marcel 2016 2022 [10]
Rosanna Costa 2022 Present day [10]

See also

References
  1. Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
  2. "Reservas del Banco Central".
  3. Corbo, Vittorio, and Leonardo Hernández. "Ochenta años de historia del Banco Central de Chile." Working Paper No. 345, Central Bank of Chile (2005).
  4. "Central Bank of Chile website, About, Functions". Archived from the original on 2013-11-29. Retrieved 2013-12-20.
  5. Central Bank of Chile: Monetary Policy in an Inflation Targeting Framework. Archived 2013-12-21 at the Wayback Machine Central Bank of Chile, January 2007.
  6. Law 18,840, Basic Constitutional Act of the Central Bank of Chile Archived 2013-01-20 at the Wayback Machine, Title I, Section 3.
  7. Central Bank of Chile, Statistics Database, Prices, Historical Information, Headline CPI annual change.
  8. Central Bank of Chile, Press Release, April 10, 2008 (in Spanish).
  9. Central Bank of Chile, Press Release, January 3, 2011.
  10. Banco Central de Chile. "Nómina de autoridades del Banco Central de Chile desde su fundación" (PDF). www.bcentral.cl. Retrieved 2020-05-01.

33°26′28″S 70°39′10″W

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