(Recasts; adds details on decision, central bank's comments)
By Anthony Esposito
SANTIAGO May 15 Chile's central bank kept its
key interest rate on hold at 4.0 percent for a second
consecutive month on Thursday, as expected, after a recent spike
in consumer prices pushed annual inflation above the bank's
stated tolerance range.
The bank reiterated in its post-meeting statement that it
will consider future rate cuts depending on the
evolution of domestic and external macroeconomic conditions and
implications on the inflation outlook.
Weak economic growth and rising prices have put the bank in
a monetary policy conundrum. The slowing economy is widely seen
as needing more stimulus, but cutting the interest rate too
early could spark fears it is fanning inflation.
In the 12 months through April, inflation broke
above the central bank's tolerance target of 2 percent to 4
percent for the first time in around two years, while the
economy of the top copper producer grew at its slowest pace in
the first quarter since early 2010.
The bank said that in the most likely scenario the jump in
inflation, which is due in part to the Chilean peso's
depreciation, will be temporary.
The depreciation of the peso - it has weakened
nearly 5 percent against the U.S. dollar this year following
last year's drop of 9 percent - has made imported goods more
expensive, driving up prices.
Previously, the bank pointed out that it expected inflation
to test the high end of its tolerance range for some months, but
that inflation should cool down as economic deceleration
outweighs the effect of the weaker peso.
Between October and March the bank cut the benchmark rate by
100 basis points to 4.0 percent in an effort to stimulate
Chile's flagging economy.
Most of the 59 analysts and 58 traders surveyed in two
separate central bank polls released earlier this week had said
they expected a rate hold in May.
Analysts see a cut to 3.75 percent in June and traders see a
reduction to that level within three months, the polls showed.
(Reporting by Anthony Esposito; Editing by Jan Paschal and Eric