UPDATE 1-Chile cbank only weighed rate hold in March- minutes

Mon Apr 1, 2013 8:33am EDT

Related Topics

* Cbank unanimous on decision to keep rate at 5 pct
    * Minutes flag risks of dynamic local demand, output
    * Cbank weighing local strength against global risks


    SANTIAGO, April 1 (Reuters) - Chile's central bank only
considered the option of keeping its key lending rate steady
last month, underlining that dynamic domestic demand and
activity present risks going forward, the minutes of March's
monetary policy meeting showed on Monday.
    All five members of the bank's governing board voted to keep
the rate steady at 5 percent on March 14, where it
has been held since a surprise cut in January 2012.
 
    The bank's hands are seen tied, as the entity weighs
persistent global risks to Chile's export-dependent economy
against buoyant local economic growth.
    "All the Board members agreed that the scenario analyzed
posed a dilemma for monetary policy making, because there were
opposing forces recommending decisions in opposite directions.
Nevertheless, they concluded that the right decision was to keep
the (rate) at 5 (percent)," the bank said in its minutes.

 
   
    LOCAL RISKS 
    Chile's booming domestic demand has triggered fears of a
growing current account deficit and even of overheating among
some analysts.
    "With respect to the local economy, all the Board members
commented on the strength of output and especially domestic
demand because of the risks it could pose going forward," the
bank added. 
    Central bank board member Enrique Marshall said last month
the main local risk to Chile's economy is that growth in
domestic demand continues to outpace gross domestic product
growth. 
    However, strong local consumption has not triggered price
pressures so far.
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