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NEW YORK, April 20 (Reuters) - Chile’s central bank governor said the country’s labor market is likely to weaken some in 2015 and though the economy is expected to recover gradually this year, growth will still be soft compared with the high pace of a couple of years ago.
Economic growth slowed to a five-year low of 1.9 percent in the world’s top copper exporter last year as mining investment and consumer demand cooled, but the labor market has remained resilient.
“We have seen a decline in job creation, some less quality jobs, so in that sense we expect some weakening of the labor market this year,” Rodrigo Vergara said at an event sponsored by Bloomberg in New York.
The central bank sees economic growth gradually recovering to a 2.5 percent to 3.5 percent range in 2015.
“I think we might have a couple of years with low growth but then growth is going to pick up,” said Vergara.
The economy is seen growing more quickly “in the first quarter of this year, then moving upward the rest of the year, particularly the second half,” said Vergara.
The biggest risk to Chile’s commodities-dependent economy remains China, its top trade partner, said Vergara, adding that as long as China’s economy grows in the 6.5 percent to 7 percent range, that would be sufficient for demand.
China represents 25 percent of exports for the South American country.
Stubbornly high inflation, which in annual terms has remained above the central bank’s 2 to 4 percent target range for the last 12 months, is expected to cool and fall back toward its target this year.
That could allow the central bank, which has been broadly neutral on monetary policy since cutting the benchmark interest rate by 200 basis points from October 2013 to October 2014, to reverse course.
“We expect to start normalizing rates again by the end of this year, early next year, very much data dependent,” said Vergara.
Reporting by Daniel Bases and Jonathan Spicer; Writing by Anthony Esposito and Rosalba O'Brien