UPDATE 1-Chile central bank holds key rate at 3 pct, as expected
(Recasts; adds central bank's comments, background)
SANTIAGO, July 14 (Reuters) - Chile's central bank held the benchmark interest rate at 3.0 percent on Tuesday, as expected, maintaining its neutral bias amid signs of a nascent recovery and persistently high inflation.
The economy of the top copper producer has been slow to recover after hitting a five-year low in 2014, recently prompting the government to scale back expectations for growth this year to 2.5 percent from a prior view of 3.6 percent.
"Output and demand have been weaker than assumed in the Monetary Policy Report's (June) baseline scenario, and private growth expectations have dropped for this and next year," the central bank said.
Subdued consumer and business sentiment have also weighed on the economic recovery.
The bank cut the interest rate 200 basis points between October 2013 and October 2014 to stimulate a flagging economy.
The bank noted that confidence indicators have not recovered.
Data last week showed that Chile's inflation pace picked up again, bringing the figure for the 12 months to June to 4.4 percent, above the bank's 2 percent to 4 percent tolerance range.
"The evolution of inflation will continue to be monitored with special attention," the bank said.
The combination of weak growth and stubborn inflationary pressures is likely to give the bank reason to keep rates on hold until at least the first half of 2016, said Banco Santander in a note to clients. (Reporting by Anthony Esposito; editing by Chris Reese and G Crosse)
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