(Adds central bank comments on interest rate, background)
By Antonio De la Jara
SANTIAGO, March 30 (Reuters) - Chile’s central bank said on Monday that inflation will not ease as quickly this year as it had forecast and economic growth will recover from the five-year low in 2014, likely dissuading the bank from resuming monetary easing in 2015.
In its quarterly Monetary Policy Report (IPoM), the bank forecast inflation at the end of 2015 at an annualized 3.6 percent, above its previous view of 2.8 percent.
Annual inflation has remained stubbornly above the central bank’s 2 percent to 4 percent tolerance range since April 2014, and has been a key factor in the bank keeping its benchmark interest rate steady at 3.0 percent.
The bank said inflation will “continue to converge towards target, but will remain above 4 percent in annualized terms for some more months, nearing 3.0 percent during 2016.”
The bank kept its full-year 2015 growth forecast for Chile, the world’s top copper exporter, unchanged at a range of 2.5 percent to 3.5 percent, and said there should be more evident recovery toward the end of the year.
In 2014, growth in gross domestic product was 1.9 percent, slower than in past years on stagnating investment, most notably in the mining sector, and falling consumption.
Earlier on Monday, manufacturing data came in below forecasts, dampening hopes that a turnaround was already in place.
To counteract the slowdown, the bank cut its benchmark rate 200 basis points between October 2013 and October 2014. Recent polls have suggested that most analysts expect the rate to stay on hold for the remainder of 2015, given high inflation.
But the bank hinted on Monday it may look to raise interest rates by the end of the year, saying the rate would follow a trajectory “somewhat above” that forecast in polls.
“In the most likely scenario, there should not be any additional cuts (to the benchmark interest rate). In fact, towards the end of the year, we should be discussing when the right time is to normalize the monetary stimulus,” it said. (Writing by Anthony Esposito; Editing by Rosalba O‘Brien, Jeffrey Benkoe and Peter Galloway)