February 1, 2013 / 12:05 PM / in 5 years

UPDATE 2-Chile central bank only considered rate hold in Jan-minutes

* Decision to hold rate was unanimous
    * Central bank says key rate at neutral level
    * Rate seen at 5 pct in coming months

    SANTIAGO, Feb 1 (Reuters) - Chile's central bank only
considered keeping its key lending rate on hold last month
against a backdrop of brisk domestic growth and controlled
inflation, the minutes of January's monetary policy meeting
showed on Friday.   
    All five members of the bank's governing board voted to keep
the rate steady at 5 percent, where it has been
held since a surprise cut in January 2012.
    "It was estimated that maintaining the (rate) was justified
(because of) its current level being within a range of neutral
values. Moreover, the current level was consistent with
inflation converging to the target within the projection
horizon," the bank said.
    In standard monetary policy parlance, a neutral interest
rate neither spurs or curbs economic growth, all other factors
being equal.
    The bank is expected to keep rates steady at its Feb. 14
policy meeting, and the rate is likely to inch up to 5.25
percent in 12 months, the bank's fortnightly poll of traders
showed late last month. 
    "One board member noted that, in the current context, the
most prudent decision in the short term was to keep the (key
rate) where it was," the minutes said.        


    Chile's consumer price index was flat in December, bringing
inflation in the 12 months to December to 1.5 percent, the INE
government statistics agency reported last month.
    That is well below the central bank's target range of 2
percent to 4 percent and the lowest rate since at least December
    "The recent exchange rate appreciation could have helped to
moderate inflationary pressures temporarily," the bank's minutes
    Chile's peso has firmed 1.61 percent versus the
U.S. dollar since the start of the year.
    "Several board members underscored the long-lasting
expansionary policies in the developed world, which put
additional pressure on emerging economies, particularly Chile,"
minutes showed.
    One of the board members said the current scenario of high
commodity prices and favorable financing conditions, "confirmed
pressures for a peso valuation and capital flows towards
developing countries with strong fundamentals, (such) as Chile."
    Many Latin American leaders are concerned that stimulus
measures in the developed world will trigger more capital flows
that could further strengthen the commodities-dependent region's
    Some of the bank's board members said that trade balance
data at the end of 2012 showed "an increase in external demand,
particularly because of higher export value for copper, with the
consequent reduction in inventory build-up," according to the
    "This, they added, suggested that the current account
deficit for the year 2012 would be smaller than foreseen in the
(Dec. 18 quarterly) Monetary Policy Report."
    Here's a link to the central bank's minutes:

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