UPDATE 1-Chile central bank slashes 2014 growth forecast

lunes 31 de marzo de 2014 15:02 GYT
 

(Adds central bank head comment, monetary policy and inflation details, context)

SANTIAGO, March 31 (Reuters) - Chile's central bank slashed its estimates for 2014 economic growth on Monday, and repeated its bias towards possible further cuts in the benchmark interest rate, against a backdrop of easing investment and falling global commodities prices.

The central bank anticipates the economy of the top copper producer will expand between 3.0 percent and 4.0 percent this year, compared to a projected range of between 3.75 percent and 4.75 percent previously, it said in its quarterly Monetary Policy Report.

"This reflects that investment expansion this year will be lower than prior projections...the base scenario assumes that this phenomenon will not deepen and in some ways may reverse," said central bank head Rodrigo Vergara.

It is a stronger downgrade than the market had expected and reflects concerns that the economy is cooling and investment ebbing, just as the copper price has fallen.

It will pile pressure on new President Michelle Bachelet, who earlier on Monday announced the first key part of her tax-and-spend reform package.

She says that reform is needed for growth to be sustainable in the long-term, but critics charge the timing is risky.

The bank on Monday also repeated its recent bias towards possible further rate cuts.

It has cut Chile's key benchmark interest rate 100 basis points since October to 4.0 percent in an attempt to stimulate the economy, but a recent uptick in inflation spurred by a weaker peso may make further easing trickier.   Continuación...