March 7, 2017 / 1:32 PM / a year ago

UPDATE 1-Chile central bank head takes dovish tone in speech

(Adds details and context throughout; adds quote)

SANTIAGO, March 7 (Reuters) - Chile central bank head Mario Marcel forecast subdued first quarter growth and said a “more expansive” monetary policy is necessary to meet inflation targets, according to a transcript of remarks he delivered to a think tank in Santiago on Tuesday.

In a generally dovish speech, Marcel said economic growth figures in February and the first quarter as a whole will be affected by an ongoing strike at BHP Billiton’s Escondida copper mine in Chile, the world’s largest.

He added that growth in the first quarter “will not be better” than fourth quarter 2016 figures, and that recent evolutions in the Chilean economy will affect the bank’s next official growth projections, scheduled for release later in March.

A more expansive monetary policy would be needed to reach the bank’s 3 percent inflation target over the policy horizon, he said, a statement that adds to a number of dovish statements made by the bank in recent months.

In January, Chile’s central bank cut the benchmark interest rate 25 basis points to 3.25 percent. In February, the bank held the rate, but indicated that additional rate cuts were imminent.

“As was signaled in the December Monetary Policy Report, a more expansive monetary policy is necessary to reach the inflation target of 3 percent in 24 months in a context of weakening internal demand and exchange rate appreciation,” Marcel said, referencing a report the bank puts out every quarter.

“We already concretized part of this greater expansiveness in January, when we reduced the interest rate by 25 basis points.”

Continued weak employment figures for salaried workers were “worrying” for the bank, Marcel added.

The strike at BHP Billiton’s Escondida mine, which produced about 5 percent of the world’s copper last year, is nearing a month in length. The union and the company appear far from an agreement, and there have been incidents of violence in recent days.

Copper is Chile’s most important export by far, meaning mining disruptions can have a significant impact on growth. (Reporting by Gram Slattery; Editing by Chizu Nomiyama)

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