June 7, 2019 / 10:56 PM / a year ago

UPDATE 1-Chile central bank surprises with rate cut, braces for sharper slowdown

(Adds reduced economic estimate, context)

SANTIAGO, June 7 (Reuters) - Chile’s central bank unexpectedly cut the benchmark interest rate by 50 basis points to 2.5% on Friday as it braced for a sharper economic slowdown because of the U.S.-China trade dispute.

The bank, citing impacts from global trade tensions, slashed its view for Chile’s 2019 economic growth to 2.75-3.5%, from 3-4% just two months ago, it said in a statement.

Chile is the world’s top producer of copper, a commodity whose demand is driven heavily by China.

A central bank poll of traders had forecast a rate hold in the short-term. The bank said its decision to cut the interest rate was taken unanimously by members of its board.

“The board considers that ... the economic recovery has not been sufficient to close the productivity gap and drive inflation. Therefore, it saw it necessary to re-calibrate its monetary impulse,” the bank said.

Reporting by Natalia Ramos, Writing By Mitra Taj, Editing by Rosalba O'Brien and Grant McCool

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