UPDATE 1-Chile central bank holds key rate steady for 5th straight month

jueves 19 de marzo de 2015 17:34 GYT
 

(Adds comments from central bank meeting, analyst, background)

SANTIAGO, March 19 (Reuters) - Chile's central bank held the benchmark interest rate steady at 3.0 percent on Thursday for a fifth consecutive month, as widely expected, and reiterated its neutral bias on future policy.

Over 80 percent of the 62 traders surveyed by the central bank in a poll published last week said they expect the benchmark rate to be held at 3.0 percent until at least September.

The central bank lowered the rate by 200 basis points between October 2013 and October 2014 to stimulate a flagging economy, but has since paused to allow above-target inflation to cool.

"In the most likely scenario, annual inflation is forecast to remain above the tolerance range for some months, a development that will continue to be monitored with special attention," the central bank said in its policy statement.

Inflation surprised on the upside in January and February and the annualized figure has stubbornly remained above the bank's 2- to 4-percent target range for nearly a year, dissuading policymakers from lowering rates further.

Last week, Chile's central bank chief Rodrigo Vergara said that the bank has no space for additional monetary stimulus in the foreseeable future, but will use its policy tools to comply with its inflation mandate.

"In what remains of the year, we don't expect any more cuts in the monetary policy rate, even though the low dynamism of private domestic demand would justify new cuts," Banco Santander said in a research note on Thursday.

Domestic demand contracted 0.6 percent last year after zero growth in the fourth quarter, central bank data showed on Wednesday, while the economy picked up pace in the final quarter of 2014. (Reporting by Anthony Esposito, editing by G Crosse)