UPDATE 2-Chile central bank sees no big short-term capital inflow
* Latin America worried about stimulus in developed world * Chile peso up more than 9 percent against dollar this year * Central bank head says no need yet for forex intervention By Felipe Iturrieta SANTIAGO, Dec 19 (Reuters) - Large flows of short-term capital are not flooding into Chile in the wake of the U.S. Federal Reserve's announcement of a fresh round of monetary stimulus, central bank president Rodrigo Vergara said on Wednesday. Investors chasing higher interest rate returns have also been lured by brisk growth in much of Latin America, as the debt crisis drags on in Europe and the United States' economic recovery remains tepid. " We don't see a big flow of short-term capital entering the Chilean economy," Vergara told a business forum on Wednesday. Chile's central bank on Tuesday hiked economic growth forecasts for both this year and next, adding that buoyant domestic demand and investments are seen remaining firm. Additionally, the country's key rate has remained on hold at 5.0 percent since a surprise cut in January, spurring investor interest amid very low rates in the United States and much of Europe. Vergara reiterated that intervening in the local peso currency market was a tool at the bank's disposal, but that if it hadn't intervened so far it was because it hadn't been deemed "necessary." Chile's peso has strengthened over 9 percent this year against the U.S. dollar, making it one of the strongest foreign currency performers against the dollar among 152 currencies tracked by Reuters. The peso's strength cuts in exporters' competitiveness. Early last year, the central bank launched a $12 billion dollar purchasing program, which lasted through December 2011, to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar. Latin American policy-makers are worried stimulus measures in the developed world will trigger more capital flows that could further strengthen the commodities-dependent region's currencies, its finance ministers said on Friday. Emerging markets have blamed loose monetary policies in rich nations for spurring destabilizing flows of hot money, and the IMF is trying to forge a consensus on when it makes sense for nations to resort to capital curbs. The U.S. Federal Reserve, announcing a new round of monetary stimulus, took the unprecedented step earlier this month of indicating interest rates would remain near zero until unemployment falls to at least 6.5 percent. It was the latest in a series of unorthodox measures taken by central banks around the world to battle erratic, sub-par recoveries from the financial crisis and recession of 2007-2009.
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