UPDATE 1-Chile's central bank says it could delay interest rate hikes

miércoles 3 de junio de 2015 11:07 GYT
 

(Adds central bank's comments, background)

By Anthony Esposito and Antonio De la Jara

SANTIAGO, June 3 (Reuters) - Chile's central bank said on Wednesday it could take longer than anticipated to gradually start hiking its key interest rate, as economic growth has been weaker than previously forecast and inflation has been quicker to cool.

In its quarterly Monetary Policy Report (IPoM), the central bank cut its view for 2015 economic growth in the top copper producer to between 2.25 percent and 3.25 percent, from a prior forecast of 2.5 percent to 3.5 percent, citing soft private spending and devastating floods in March in the northern part of the country.

It sees annual inflation ending the year at 3.4 percent, compared to its previous view of 3.6 percent.

"Somewhat lower dynamism of activity and a somewhat faster convergence of inflation suggests that, if our base scenario assumptions are right, the discussion on the gradual withdrawal of monetary stimulus could be delayed beyond that suggested in March," the report said.

Central Bank President Rodrigo Vergara said on April 1 that the central bank's operating assumption was that it would raise the benchmark interest rate toward the end of 2015 or the start of next year.

It cut the rate by 200 basis points between October 2013 and October 2014, but soft economic growth and rising inflationary pressures - annual inflation has been above its 2 percent to 4 percent target range for over a year - have stayed its hand.

Chile's economy, which grew at a five-year low of 1.9 percent in 2014, has been held back by waning consumer and business sentiment.   Continuación...