Slow and Steady (and Stable) Wins the Race: the Chilean Central Bank’s new President

On Tuesday Chilean President Bachalet announced her decision to appoint Mario Marcel to replace Rodrigo Vergara as head of the Central Bank when Vargara’s term ends in December, Reuters reported.

Mario Marcel has served as a councilmember of the Central Bank since September 2015 after unanimous approval by the Senate. Mr. Macel previously served as budget director for Chilean President Lagos (2000-2006) and was senior director of Governance Global Practice at the World Bank when he was appointed to the Central Bank.

From what Mr. Marcel has said and the policies he’s promoted over the years, it is expected that he will promote stability and economic growth, in that order, as President of the Central Bank.

In a September interview with La TerceraMr. Marcel commented on the short-term economic outlook for Chile and the role that the Central Bank plays in promoting growth.

The Chilean economy is expected to grow a modest 1.7 percent in 2016 and 2.0 percent in 2017. Many politicians, such as Senator Ignacio Walker, expressed their dissatisfaction with the relatively slow rates of economic growth. But, as Mr. Marcel points out, “growth is not zero, but I think we that it could grow more and we would like more growth.”

Mr. Marcel partially blames the slow growth on low and declining investment, especially in the mining sector.

Some have critiqued the Central Bank for using interest rate policy more aggressively to promote economic growth. Again, Mr. Marcel pushed back against these critics by pointing out that the Central Bank already employs aggressive traditional tactics to improve growth: “At present, monetary policy is countercyclical, because there is a difference of between 50 and 100 basis points with the natural [interest] rate.”

His comments in the La Tercera interview last month provide a look into what policies he will pursue as President of the Central Bank. He will not risk the gains made in combating inflation through aggressive monetary policy. Stability will be his goal and stability will put the Chilean economy on a path to boom once more.

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