Chile central bank cuts benchmark rate to 1.75% amid protests

SANTIAGO (Reuters) - Chile´s central bank on Wednesday slashed its benchmark interest rate to 1.75% from 2%, its third major rate cut since June, as protests over economic inequality rocked the South American nation.

The unanimous decision was widely anticipated by the market. Chile´s economy had been sputtering well before this week´s protests, with both inflation and growth lagging.

“In the short term, activity will be impacted by the partial paralyzation of the country and damage to its infrastructure,” the bank said in a statement.

At least 15 people have died in protests that started over a hike in public transport costs, prompting a weekend of riots, arson attacks and looting of businesses and the declaration of a state of emergency by President Sebastian Pinera over a large swath of Chile.

Pinera on Tuesday announced an ambitious raft of measures to quell protests, including a guaranteed minimum wage, a hike in the state pension offering and the stabilization of electricity costs.

The bank said the medium-term outlook would depend on “the magnitude and velocity of the reconstruction, the impact on expectations and the effects of the measures announced by the administration.”

Finance Minister Felipe Larrain said earlier this week the civil unrest would “undoubtedly” have a “significant” impact on the economy.

Reporting by Dave Sherwood; Editing by Leslie Adler and Tom Brown