UPDATE 1-Chile cenbank holds rate as expected, peso comment seen tepid
* Rate held steady at 5.0 pct since January 2012 * Cenbank say peso has 'slightly' appreciated over last month * Rates seen remaining on hold in the near term By Anthony Esposito SANTIAGO, Jan 17 (Reuters) - Chile's central bank kept its benchmark interest rate steady at 5.0 percent on Thursday - as expected - for the 12th consecutive session as buoyant domestic growth counters an uncertain outlook for global demand. The bank underscored the peso had appreciated "slightly" versus the U.S. dollar over the last month, but didn't use stronger language that could indicate it was mulling actions to stem the local currency's strength. "There's no intention of hiking the rate, due to capital flows and the peso's strength. While there is a mention that the Chilean currency has appreciated, you don't see an imminent wish to intervene," said Matias Madrid, economist with Banco Penta in Santiago. The peso, which last year firmed 8.48 percent and ranked among the strongest foreign currency performers against the U.S. dollar among 152 currencies tracked by Reuters, has been boosted by Chile's brisk economic growth and healthy prices for top export copper. It has firmed another 1.4 percent in the new year. President Sebastian Pinera said earlier Thursday the government was looking closely at the peso's strength, which has gained nearly 10 percent against the U.S. dollar since the beginning of last year. Pinera added that the central bank had the tools to intervene in the currency exchange market, but it had to look at the peso's long-term fundamentals versus the U.S. dollar. The central bank's key rate has been held at its current level since last January as robust economic growth and moderate inflationary pressure mostly offset risks associated with slowing demand from top trade partner China and fallout from the euro zone's crisis. "Domestically, recent output and demand indicators have evolved in line with forecasts in the last Monetary Policy Report," the bank said. "Headline and core inflation are below 2 percent year-on-year, while inflationary expectations in the policy horizon are aligned with the target." The consumer price index was flat in December. That brought inflation in the 12 months to December to 1.5 percent, well below the central bank's target range of 2 percent to 4 percent and the lowest rate since at least December 2011. Chile's small, export-dependent economy is forecast to have expanded 5.5 percent in 2012, and is seen growing between 4.25 percent and 5.25 percent this year on the back of sturdy domestic demand and strong investments. "The labor market is still tight. Job creation increased and wage growth remained stable," the bank added. The key rate is likely to inch up to 5.25 percent by year-end, a central bank poll of analysts showed earlier in January. Elsewhere in the region, Brazil's central bank held its benchmark interest rate steady at record lows on Wednesday, but said the short-term inflation outlook had worsened in a signal borrowing costs could remain unchanged for some time. Pinera's prior comments come as the central bank and Finance Minister in recent weeks have expressed preoccupation over the local currency's strength, which is hurting the competitiveness of Chilean exporters. The central bank deployed a dollar-purchasing program in 2011 to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar. Officials in emerging markets have blamed loose monetary policies in rich nations for spurring destabilizing flows of hot money to developing nations, which have higher interest rates than the near zero short-term rates in heavyweight economies such as the United States and Japan.
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