(Bloomberg) — Chile’s Constitutional Convention approved an article stating that the central bank must consider additional factors, including employment and climate change, when deciding its monetary policy, making it difficult for the monetary authority to mandate.
Central bankers will have to consider those elements and also the general direction of the government’s economic policies in meeting their objectives, according to a paper that was approved on Friday.
The Convention voted to retain the central bank’s current objective of ensuring price stability. It will continue to safeguard the financial system and ensure the normal functioning of national and international payments.
Andrés Pérez, chief economist for Chile and Colombia at Banco Itaú, pointed out that, while maintaining financial and price stability as objectives of the central bank is definitely positive, additional considerations to his mandate, such as the volatility of the exchange rate and the environmental protection, can complicate your decision-making process.
Last week, the Convention also approved a proposal that declares the bank as an autonomous entity of a technical nature.
Chile’s Constitutional Convention is in the last days of plenary votes, which cover crucial issues such as the environment, natural resources and the central bank. Having reached the required two-thirds majority, the proposals on the monetary authority were included in the draft of the new Magna Carta, which will be reviewed by a special commission and then put to a referendum on September 4.
Other approved items
The plenary approved articles that establish that the central bank is prohibited from buying financial instruments issued by the Government, its agencies or companies controlled by the State, except in case of emergency and only in the secondary market.
Another approved article establishes that the directors can be removed from their position by the Supreme Court, upon request of the majority of the legislature or of the Council of the bank, or of the president.
The plenary also approved an article that establishes that the mandate of the president of the central bank will last for five years. The head of state of the nation will also have the right to nominate the president of the monetary authority.
Gender parity and territorial representation will be taken into account in the appointment of the members of the Council.
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Chile Convention Wants Central Bank to Look Beyond Inflation
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