UPDATE 1-Chile June inflation comes in below forecast, rate cuts eyed

martes 8 de julio de 2014 09:28 GYT
 

(Recasts with details on rates, context on economy, analyst comment)

SANTIAGO, July 8 (Reuters) - Chile's June inflation was the lowest monthly increase this year and came in slightly below a Reuters forecast, lending support to views the central bank is poised to resume interest rate cuts to spur the economy.

The consumer price index rose 0.1 percent last month as prices for food, non-alcoholic beverages and transport increased, the government said on Tuesday.

The reading bolsters views that a recent uptick in inflation was "limited and controlled" and carves out room for the central bank to cut rates again, said Ruben Catalan, economist with Bci Estudios.

"This month's monetary policy meeting would be the perfect opportunity to change the tone of communiques to pave the road for restarting the rate-cutting cycle at the August monetary policy meeting," Catalan said.

The bank cut its benchmark interest rate by 100 basis points to 4 percent between last October and March in a bid to boost the economy, which is slowing on the back of lower investment and consumption. It has since kept the rate on hold, however, as inflation has surged above the bank's 2 percent to 4 percent tolerance range.

Inflation in the 12 months to June came in at 4.3 percent, still above that tolerance range. Core inflation was also 0.1 percent in June.

News of tamer-than-expected inflation comes a day after data showed Chile's economic activity rose 2.3 percent in May from the same month a year ago, undershooting forecasts as a consumption boom wanes.

(Reporting by Santiago newsroom; Writing by Alexandra Ulmer; Editing by W Simon and Meredith Mazzilli)