Sebastián Claro: What to expect from the Fed's monetary policy normalization?

Presentation by Mr Sebastián Claro, Deputy Governor of the Central Bank of Chile, at the 2017 IIF Latin America Economic Forum, Asunción, Paraguay, 1 April 2017.

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

Vice-Governor, Central Bank of Chile

I would like to start thanking the organizers for this invitation.

Let me start with a disclaimer. Next Monday, April 3rd, the board of the Central Bank of Chile will present its inflation report to the Senate. Therefore, I will not be able in this occasion to offer a detailed discussion on the macroeconomic situation and perspectives in Chile, which will be described in detailed in the report. Rather, I have decided to focus on a broader issue that is relevant for Chile and the region in the current scenario.

During 2017, we will finally witness the process of monetary policy normalization in the United States. After almost 8 years keeping the Federal Funds rates essentially at zero, the Federal Reserve has started a gradual process of interest rate hikes. This is good news. Fundamentally, the normalization of monetary policy is the natural consequence of a normalization of the US economy after the Global Financial Crises. A normal US economy is a positive phenomenon for the world economy.