SANTIAGO, July 11 (Reuters) - Chile's central bank kept its
key benchmark interest rate at 5.0 percent on Thursday, as
expected, but hinted a deepening of the Andean country's
economic slowdown could trigger a rate cut in coming months.
'The consolidation of the trends outlined in the last
Monetary Policy Report could call for adjustments to the
monetary policy interest rate in the coming months,' the bank
said in its post-meeting statement.
The rate has been on hold since a surprise cut in January
2012, but a sharper-than-forecast economic slowdown, tumbling
copper prices and tame inflation have increased bets a reduction
could be looming.
'Domestically, incoming information reveals an ongoing
slowdown of output and demand, especially in investment ...
consumption has remained strong, but the evolution of credit
conditions and confidence surveys suggest this variable will
lose momentum,' the bank said. It added that the labor market
The market expects a quarter-percentage point cut within
three months and another cut within six months.
'We now expect the central bank minutes to show a somewhat
more expansive bias, and expect a 25 basis point cut during the
next meeting,' Credicorp Capital said in a note to clients after
the decision was released.
The bank's governing board already weighed the option of
cutting rates in May and June, minutes of those meetings showed.
Earlier this month, the bank reduced its forecasts for 2013
gross domestic product growth, inflation and domestic demand,
underscoring that the new projections rely on a base-case
scenario of the rate following a path similar to what the market
Analysts polled by the monetary authority before Thursday's
meeting expected the rate to remain steady in July and August,
but saw it being cut by 50 basis points within five months.
In a separate survey released on the same day, 56 traders
polled by the bank maintained their forecasts from two weeks ago
that the rate would remain on hold in July, be cut to 4.75
percent within three months, and then be reduced to 4.50 percent
within six months.
(Reporting by Santiago Newsroom.; Writing by Anthony Esposito;
Editing by G Crosse, Andrew Hay and Diane Craft)
Keywords: CHILE CENBANK/RATES
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