UPDATE 2-Chile raises key rate to 3.25 pct; more hikes likely
(Adds analyst comment, background, graphic) SANTIAGO, Oct 15 (Reuters) - Chile's central bank raised its benchmark interest rate 25 basis points to 3.25 percent on Thursday and said further hikes were likely as it tries to rein in stubbornly high inflation. The market had been split on whether the bank would hike the rate or leave it at 3.0 percent as it has done since October 2014, as top copper exporter Chile struggles with sluggish growth. In the end, worries over persistently high inflation won out. "The future trajectory of the monetary policy rate considers additional adjustments aimed to ensure the convergence of inflation to target, at a pace that will depend on incoming information and its implications on inflation," the central bank said in its post-meeting statement. At its prior monetary policy meeting in September the bank left the interest rate on hold but indicated a tightening of policy in the short term was on the cards. "With this hike the bank made good on its promise and that is very important in terms of credibility ... as things stand today the most likely scenario is a rate pause in November and we could see another hike later on," said Luis Felipe Alarcon, economist with EuroAmerica in Santiago. Inflation has been at or above the bank's 2 to 4 percent tolerance range for nearly a year and a half, in large part due to a depreciating peso currency. The bank said it will continue to closely monitor inflation. Other Latin American economies have also begun rate raises in a bid to tame inflation fanned by currency falls against the dollar. Peru raised its rate in a surprise decision last month and meets again on Thursday, while Colombia also raised borrowing costs last month for the first time in a year. (Reporting by Gram Slattery, Anthony Esposito, Felipe Iturrieta and Rosalba O'Brien; Editing by Andrew Hay)
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