(Recasts to include rates decision, adds central bank’s comments)
SANTIAGO, April 17 (Reuters) - Chile’s central bank, as expected, took a break from its easing cycle to keep its key interest rate on hold at 4.0 percent on Thursday, following a recent bump in inflation and somewhat stronger-than-expected growth.
Faced with flagging growth and cooling domestic demand, especially in investment, the bank had cut its key interest rate by 100 basis points to 4.0 percent since October in a bid to jolt the economy.
Despite the pause, the bank again said it will consider further rate reductions if necessary.
“The board will consider the possibility of making additional cuts to the policy rate in line with the evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook,” a post-meeting statement said.
The majority of analysts and economists polled by Reuters expected a pause in the easing cycle after data this month showed the consumer price index rose in March at its fastest pace in about 1-1/2 years.
“Annual CPI inflation has risen to 3.5 percent, influenced by higher prices of foodstuffs and fuels, together with the depreciation of the peso,” the central bank said.
Chile’s peso currency has depreciated 5.56 percent against the U.S. dollar so far this year, after falling 9.01 against the greenback in 2013.
The bank added that inflation expectations remain around 3 percent, the midpoint of the bank’s target.
Regarding slowing growth, the bank underscored that local economic indicators confirm the low dynamism of output and demand.
Previously, the bank had said it has the “space and determination to help lessen the cyclical economic slowdown” if macroeconomic conditions merit it.
In late March, it slashed its estimates for 2014 economic growth and repeated its bias toward further cuts in the rate, against a backdrop of easing investment and falling global commodities prices. (Reporting by Anthony Esposito; Editing by Steve Orlofsky)