* March economic growth was the slowest since July 2011
* Investment outlook has moved lower, cenbank says
* Peso hasn't weakened despite lower copper prices-cenbank
By Felipe Iturrieta
SANTIAGO, May 8 Chile's robust economic growth
is slowing faster than expected, central bank president Rodrigo
Vergara said in a speech on Wednesday, citing signs of less
domestic demand, particularly the outlook for investment.
Recent economic data "showed a greater slowdown than what we
(the central bank) expected in our base scenario in our last
IPoM (monetary policy report)," he said.
In that report, issued on April 2, the bank forecast 4.5
percent to 5.5 percent economic growth for Chile in 2013, easing
from the 5.6 percent growth rate last year.
Even so, Vegara gave no indication that the central bank
board would modify its benchmark interest rate of 5 percent when
it meets again on May 16. Chile's central bank has frozen the
rate since January 2012.
Vergara said that while the rate was high by international
standards, it was neutral for Chile. In monetary policy
parlance, a neutral rate does not spur or slow growth, all other
factors being equal.
Chile's monetary policy was contending with opposing
foreign and domestic forces, he said.
"What are these forces?" he asked rhetorically. "On one side
you have a weak international economy with risks, along with
ultra expansive monetary policies. On the other, there is a
pretty strong domestic growth and demand."
Still, despite the robustness of economic growth Vergara
said, "In the domestic economy, there have been recent signs of
a deceleration of activity and domestic demand."
"In Chile, activity has halted the continuous growth trend
that was displayed in most of 2012," he added.
INVESTMENT SEEN MOVING LOWER
"The outlook for investment, the main driver of growth in
domestic demand lately, has moved lower," Vergara said. But he
added that there aren't any big changes in "private
Chile's economic activity growth in March was the slowest
since July 2011, as expansion in the mining and retail sectors
was partly offset by declining industrial activity and two fewer
working days, according to government data released on Monday.
During the first quarter, economic activity grew 4.4 percent
compared with the same period a year ago.
Recent data in the real-estate sector also points to a
moderation in activity, though there aren't any big changes in
"private consumption's trend," he added.
Regarding inflation, Vergara said that it has moderated due
to a series of "specific and transitory factors."
Chile's consumer price index posted a 0.5
percent tumble in April, falling more than expected, on drops in
transport, housing, water, electricity and fuel costs,
government data showed earlier on Wednesday.
On the peso currency, Vergara noted that it hasn't
depreciated even though prices for top export copper have, a
situation which could help widen the nation's current account
The peso typically moves in line with copper prices, as
higher prices mean more dollars entering the local market due to
sales of the metal. The inverse is true of lower prices.
An attractive interest rate differential and so-called
quantitative easing measures adopted in major economies have
also helped fuel the peso's strength.
A currency intervention program is one of the tools at the
bank's disposal, though using it comes with associated costs,
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
In midday trade on Wednesday, the peso was trading 0.15
percent weaker on the day to bid 471.00 per dollar.