* Rate held steady at 4.5 pct for second straight month
* Bank board suggests stimulus likely to increase in coming
* Bank cut rate by 25 basis points in Oct and Nov
By Anthony Esposito
SANTIAGO, Jan 16 Chile's central bank kept
steady its key interest rate on Thursday, but suggested it could
increase monetary stimulus in coming months in a bid to lift
easing economic growth and channel inflation toward its target
of 3 percent.
A recent pickup in inflation, continued weak economic output
and cooling domestic demand, especially investment, have led
many in the market to bet on new rate cuts following
25-basis-point reductions in October and November.
The bank held the rate steady at 4.50 percent
at the previous meeting on Dec. 12.
"The board estimates that in the coming months it might be
necessary to increase the monetary stimulus to ensure that
projected inflation will stand at 3 percent in the policy
horizon," the central bank said in its post-meeting statement on
Recent data has shown that growth in the top copper producer
remained sluggish in November, while inflation picked up pace in
A 0.6 percent jump in December consumer prices
brought inflation in the 12 months to December to 3.0 percent,
the midpoint of the central bank's target range.
The bank pointed out that food and energy, as well as the
short-term impact of the Chilean peso's depreciation, have
Chile's peso depreciated 9 percent versus the U.S.
dollar last year, and has lost 1.26 percent more in the first
weeks of 2014, making the price of imports more expensive.
"The Chilean economy has continued to lose strength.
Domestic output and demand have grown somewhat less than assumed
in the (December) Monetary Policy Report, particularly in
investment-related sectors," the bank said.
Expectations are high that the rate will be cut two more
times in 2014, as economic growth continues to decelerate and
domestic demand ebbs.
"The (central bank) has good timing, and they're letting the
market know they're going to cut the rate. Their timing is good
in terms of reacting to the economic outlook ahead," said Matias
Madrid, chief economist with Banco Penta.
He foresees 25-basis-point cuts in February and March.