UPDATE 1-Chile cenbank sees economy recovering after third quarter

jueves 30 de octubre de 2014 10:36 GYT

(Adds central bank chief's comments, background)

SANTIAGO Oct 30 (Reuters) - Chile's economic growth likely hit bottom in the third quarter and should pick up pace moderately and gradually during the final three months of 2014, central bank President Rodrigo Vergara said on Thursday.

Economic growth in the world's top copper producer slumped to a nearly five-year low of 1.9 percent in the second quarter on the back of waning investment, especially in the key mining sector, and on cooling domestic demand. Figures for the third quarter are due out on Nov. 18.

"During the last quarters the economy has lost strength, lowering forecasts for this year ... (economic) growth in the third quarter is likely to be the lowest of all," Vergara said.

To counteract the slowdown, the central bank has cut its benchmark interest rate by 200 basis points over the last year, but indicated earlier this month it had put the easing cycle on hold.

"The rate's current level is reasonable for at least some time," Vergara said, underscoring that the bank still has room for more rate cuts if the economic recovery it expects does not materialize.

He said monetary policy was already helping to "ease the cycle" via lower financing costs and moderating prices.

In the fourth quarter "we expect a moderate and very gradual economic recovery," Vergara said.

"Chile has a solid macroeconomic base. The conditions are present now to start the recovery process," he said.

The central bank expects economic growth to be near 2 percent in 2014, after expanding by 4.1 percent last year. The government predicts 3.6 percent growth next year, helped in part by a planned public spending surge. (Reporting by Felipe Iturrieta; Writing by Anthony Esposito; Editing by Peter Galloway)