UPDATE 2-Following Fed, Chile's central bank hikes interest rate
(Adds comment from economist, context of U.S. Fed raising rates)
SANTIAGO Dec 17 (Reuters) - Chile's central bank joined the U.S. Federal Reserve and other Latin American banks in raising its key interest rate on Thursday, as it seeks to tamp down above-target inflation.
The bank raised the benchmark rate 25 basis points to 3.50 percent at its monthly meeting, but indicated that further rate rises would come at a slower pace.
The bank began to tighten monetary policy in October and had indicated more would follow as it battles stubbornly above-target inflation.
However, it also has to juggle the need to respond to soft economic data in the top copper exporter.
The bank slightly adjusted its bias on Thursday, signaling there would be future rises at a slower pace.
"The future path of the monetary policy rate considers measured adjustments aimed to ensure the convergence of inflation to target," it said, using the term "measured" rather than last month's "additional."
The market had been split as to whether the bank would hike or hold on Thursday, although a slight majority had predicted it would leave the rate at 3.25 percent.
"It's a measure that we weren't expecting," said Francisca Perez, senior economist at Bci.
"The bank could have waited a little more for the economic fundamentals, but it seems it didn't want to be left behind after the rate rises in the United States, Mexico and Peru," she said.
As widely expected, the U.S. Federal Reserve raised rates for the first time in nearly a decade on Wednesday. Latin America's No.2 economy Mexico hiked its rate in lock-step with the Fed in a bid to protect its peso on Thursday, while Chile's neighbor Peru raised its rate last week. (Reporting by Rosalba O'Brien and Antonio de la Jara; Editing by Tom Brown and Will Dunham)
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