* Key interest rate has remained on hold since Jan. 2012
* All five board members voted to hold in Feb.
* Cenbank says rates still at levels considered neutral
SANTIAGO, March 1 Chile's central bank only
considered keeping its key lending rate on hold last month as
inflation remained in check and economic growth continued to
boom, the minutes of February's monetary policy meeting showed
With Chile's economy running near full employment, domestic
demand booming and firm investments fueling economic growth, in
stark contrast to looming global economic risks, the central
bank has kept its key interest rate on hold since a
surprise cut in January 2012.
The minutes showed that all five members of the bank's
governing board voted to keep the rate steady at 5
percent on Feb. 14.
Holding the key rate steady was justified "by the fact that
the current level of the monetary policy interest rate was
within a range of neutral values," the minutes said.
In standard monetary policy parlance, a neutral interest
rate neither spurs nor curbs economic growth, all other factors
"Keeping the monetary policy interest rate at its current
level was consistent with inflation converging to the target
within the projection horizon," the minutes added.
Inflation has remained well below the bank's target range of
2.0 percent to 4.0 percent, coming in at 1.6 percent in the 12
months to January. Consumer prices are forecast
to hover around the mid-point of the target in 12 and 24 months,
according to traders and analysts polled by the bank.
The central bank's minutes underscored the labor market and
domestic markets generally remained tight and output continued
to grow at a pace of 5 percent to 6 percent, driven by the
sustained dynamism of domestic demand, especially investment.
"These demand-side pressures, however, were reflected mainly
in higher imports, with less severe effects on the use of
internal resources and inflation," the minutes said.
Bank board members stressed the dynamism exhibited by
domestic output and demand, but said "the recent pattern of
growth driven by domestic demand had resulted in a widening of
the current account deficit, a development that, should it
continue, could be a factor of external vulnerability."