SANTIAGO, Aug 2 (Reuters) - Chile’s central bank will likely cut its forecast for 2015 growth due to weaker second quarter activity but cannot reduce interest rates given above-target inflation, bank Governor Rodrigo Vergara told a local newspaper.
“Although we do not yet have all the data for the second quarter that just ended, everything indicates it will be lower than the first one, which implicates a downwards revision of growth for this year,” Vergara told La Tercera newspaper in an interview published on Sunday.
The economy of the world’s top copper producer grew at a five-year low of 1.9 percent in 2014 due to cooling investment domestic demand, but growth was expected to rebound this year to a range of 2.25 to 3.25 percent.
While it grew 2.4 percent on the year in the first quarter, it expanded a lower-than-expected 1.7 and 0.8 percent in April and May respectively.
Vergara said the bank was not satisfied with annual inflation of above 4 percent in the wake of the depreciation of the Chilean peso against the dollar.
But he said market expectations were for inflation to return to 3.0 percent within two years, “which we also expect”.
Given high inflation, the bank will not cut interest rates to boost growth, he said, noting the current benchmark rate of 3 percent was “correct”. (Reporting by Antonio de la Jara; Writing by Sarah Marsh; Editing by Tom Heneghan)