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SANTIAGO, April 9 (Reuters) - Chile’s central bank has the “space and determination to help lessen the cyclical economic slowdown” if macroeconomic conditions merit it, bank vice president Enrique Marshall said on Wednesday.
Faced with slowing growth and cooling domestic demand, especially in investment, the bank has cut its key interest rate by 100 basis points to 4.0 percent since October in a bid to stimulate the economy.
But the bank is expected to hold that rate at 4.0 percent at its monetary policy meeting next week, according to the median estimate of traders in a bank poll published earlier in the day. Traders forecast the rate will be reduced to 3.75 percent within three months.
“The macroeconomic scenario shows an economy that is slowing faster than what was forecast a few months ago, with inflation that has adjusted faster than anticipated,” Marshall said in a presentation at the University of Concepcion.
His comments come a day after data showed that Chile’s consumer price index rose 0.8 percent in March, its fastest pace in about 1-1/2 years and above market expectations.
And while economic activity rose 2.9 percent in February from the same month a year ago, beating expectations, it was the lowest expansion for the month of February since Chile fell into recession in 2009.
“The short-term external scenario for Chile is less favorable than a year ago, especially due to a deterioration in the terms of trade,” the banker added.
Last week, the bank slashed its estimates for 2014 economic growth to a range of 3.0 to 4.0 percent and repeated its bias towards possible further cuts in the benchmark interest rate, against a backdrop of easing investment and falling global commodities prices. (Reporting by Anthony Esposito; Editing by James Dalgleish)