June 30, 2009 / 1:56 PM / 10 years ago

UPDATE 2-After dismal data, Chile central bank may cut more

(Recasts, adds potential interest rate cuts)

By Rodrigo Martinez and Antonio de la Jara

SANTIAGO, June 30 (Reuters) - Chile’s central bank chief said on Tuesday that interest rates could be cut further as more signs emerged showing the country is suffering fallout from the global economic downturn.

Chile’s industrial output plunged 10.5 percent in May from the same month a year earlier, and unemployment is rising ahead of presidential elections in December.

The central bank trimmed its base rate earlier this month to a record low 0.75 percent. It has slashed its key rate by 750 basis points since the beginning of this year, leading the charge to cut rates in Latin America as inflation and economic activity wane.

“A further reduction cannot be ruled out,” Central Bank President Jose De Gregorio said at a conference.

Exporters also want the government to try to weaken the peso CLP=CL, now at 531.50 per U.S. dollar, to stimulate their sales.

There were other signs of economic weakness on Tuesday.

Copper production by the world’s top producer of the metal fell 2.3 percent in May from a year ago. Copper output was 454,455 tonnes in May, and from January through May production fell 4.4 percent to 2,121,892 tonnes as demand contracted.

The jobless rate for the March-to-May period rose to a five-year high of 10.2 percent, more than the 9.8 percent rate for the February-to-April period.

Chile’s popular president, Michelle Bachelet, has introduced an economic stimulus plan to help weather the contraction.

But polls show her center-left coalition may lose the presidency in elections later this year, hobbled in part by internal squabbling. Bachelet cannot run for another term.

Chile’s economy shrank 2.1 percent in the first quarter of this year, and the economy may decline in 2009 for the first time in a decade. (Reporting by Antonio de la Jara; Writing by Terry Wade; Editing by Dan Grebler)

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