WRAPUP 1-Chile central bank only mulled rate hold in Nov-minutes

Wed Nov 28, 2012 7:25am EST

* Rate hold was unanimous decision
    * Cenbank members highlight strong demand, activity
    * Rate seen on hold in coming months, hiked in 2 years

    SANTIAGO, Nov 28 (Reuters) - Chile's central bank only
considered keeping its benchmark  interest rate on hold as an
option in November, when it held it steady at 5.0 percent for a
10th consecutive month, as expected, minutes of the meeting
showed on Wednesday.  
   The rate remains within a neutral range and the five-member 
central bank board unanimously decided to keep the rate steady,
the minutes of the Nov. 13 meeting said.
    Globally, in standard central bank parlance, a neutral
interest rate, in theory, should neither spur nor curb economic
growth, all other factors being equal.
    Rates have stayed on hold since a cut in
January largely because the world's No. 1 copper producer has
shown better-than-expected resilience to slowing demand from top
trade partner China and fallout from the euro zone's crisis.
    "Domestically, all of the board members highlighted the
strength shown by domestic demand and activity," the minutes
said.
    Chile's small, export-dependent economy expanded 5.7 percent
in the third quarter from a year earlier, the bank
reported last week. It grew a
seasonally-adjusted 1.4 percent in the third quarter versus the
second quarter, slowing from an upwardly revised 2.0 percent
expansion in the second quarter from the first quarter.
 

    "Regarding inflation, all the board members agreed that
total and core inflation remained in line with the inflation
target's tolerance range, despite increased dynamism of activity
and demand," minutes added.
     Chile's consumer price index rose by double
what the market expected in October, though inflation in the 12
months to October was 2.9 percent, just below the 3.0 percent
midpoint of the central bank's policy horizon target.
 
    
    RATE HIKE SEEN IN TWO YEARS
    The central bank is seen holding its key interest rate at
5.0 percent again at its monetary policy meeting on Dec. 13, and
it is seen at that level in three and six months, the bank's
fortnightly poll of traders showed separately on Wednesday.
    But traders now see the rate inching up to 5.25 percent in
24 months time. 
    The bank's last poll of traders published earlier this month
saw the rate at 5.0 percent in three and six months. It did 
not, however, see a rate hike on the horizon. 
    On inflation, the expectations in Wednesday's poll were that
consumer prices would fall 0.1 percent in November, according to
the median forecast of 58 traders. Inflation in 12 months is
seen at 2.8 percent, still a whisker below the bank's target.
    Chile's peso currency is seen trading at 480 per
U.S. dollar in seven days and three months, the poll said. The
peso was trading at 481.60 per dollar in early Wednesday trade.
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