* Bank surprised market with 25 basis point rate cut in
* Some think will be start of easing cycle as economy cools
* Monetary policy meeting decision at 6 p.m. local time
(2100 GMT) Tuesday
By Anthony Esposito
SANTIAGO, Nov 19 Chilean market watchers are
more or less split on whether the country's central bank will
hold its key interest rate steady on Tuesday or follow up last
month's surprise reduction with a another cut.
The central bank itself underscored that late on Monday,
saying for "this meeting, the majority (of the market) is
expecting a rate hold, but a relevant percentage expect a rate
cut of 25 basis points."
In a move to spur growth, the bank on Oct. 17 unexpectedly
cut the rate by a quarter of a percentage point to 4.75 percent,
citing slower world growth, less favorable terms of trade for
the Andean country, and expectations for cooling domestic
Since then, domestic demand, an important driver of the
economy, has continued to slow. Annual inflation has also fallen
well below the central bank's 2 to 4 percent target range,
giving weight to arguments for another rate reduction.
"The central bank has few, if any, reasons to stay on hold
in November and follow a piecemeal policy path," said Tiago
Severo, economist at Goldman Sachs.
"Leading indicators of activity suggest the economy should
lose momentum in the fourth quarter as private consumption
Earlier this month, the bank left the door open to future
interest rate cuts, saying the timing of any future monetary
policy moves will depend on how economic conditions evolve at
home and abroad.
A stronger-than-expected 4.7 percent economic growth spurt
in the third quarter and a widening current account deficit to
the tune of $3.44 billion - equivalent to 5.1 percent of gross
domestic product - have led some analysts to call for a rate
hold on Thursday.
"It's hard to justify more monetary stimulus when the
economy is growing near its trend rate and there is nearly full
employment, and on top of that (we have) a considerably high
current account deficit," Universidad de Chile economist Tomas
Some commentators have also suggested the bank may prefer
not to change rates in an election month. Chile held a
presidential election on Sunday which will go to a second round
A central bank poll published last week showed that 30 out
of 56 traders expected the benchmark rate to be cut
by 25 basis points to 4.50 percent, while another showed 39 out
of 58 analysts surveyed forecast it would be held at its current
The bank will publish its rate decision on its website at 6
p.m. local time (2100 GMT).