SANTIAGO, March 13 Chile's central bank cut its
key interest rate on Thursday to boost economic growth, and
suggested more reductions could be in the pipeline if domestic
and external macroeconomic conditions merit it.
The 25 basis points cut to 4.0 percent was widely forecast
by market watchers, who had also expected the bank to implement
a neutral bias going forward.
Though the bank did not eliminate the expansionary bias
present in its two previous monetary policy statements, it toned
"The board will consider the possibility of making
additional cuts to the policy rate in line with the evolution of
domestic and external macroeconomic conditions and its
implications on the inflationary outlook," the bank said.
At its meetings in January and February the bank had said it
might be necessary to increase the monetary stimulus in coming
"Unlike at its last meeting, this time the bank decided to
moderate its bias," said Ruben Catalan, analyst with Bci
Estudios in Santiago.
With the latest cut, the bank has now lowered the rate
by 100 basis points since October.
Weakness in the mining, manufacturing and the previously
robust retail sectors have weighed on growth.
Monthly consumer prices, however, posted a
larger-than-expected rise in February, taking the annual rate to
3.2 percent, mainly due to the effects of a depreciating
currency. That had led a minority in the market to
predict that the bank might choose to play it safe on Thursday.
But with the economy showing its weakest growth in January
since an earthquake devastated Chile in early 2010, market
participants had mostly bet the bank would cut.
"The Chilean economy has continued to lose strength.
Domestic output and demand have grown less than assumed in the
(quarterly) Monetary Policy Report, particularly in
investment-related sectors," the bank said.
The rate cut followed similar moves in Mexico and Peru late
last year to spur economic growth. Both regional peers have
since kept rates on hold. Brazil, by contrast, has hiked rates
to head off inflation in a tightening cycle that may be near its