Chile holds rate, says change depends on inflation outlook

By www.CentralBankNews.info     Chile’s central bank kept its monetary policy rate steady at 5.0 percent, as expected by most analysts, saying any rate change will depend on the outlook for inflation.
    Banco Central de Chile, which has held rates steady since a cut in January last year, said international financial conditions were more favorable than last month but risks from the euro zone’s fiscal and financial situation remain high and the fiscal risk in the United States was still significant, even if it had moderated.
    Economic growth in developed economies was still weak but “more positive signs are observed coming from China,” the central bank said in a statement.
    Chile’s economy is evolving in line with the central bank’s last policy report with the labor market still tight and wage growth stable.
    Chile’s Gross Domestic Product expanded by 1.4 percent in the third quarter from the second for annual growth of 5.7 percent, up from 5.5 percent in the second quarter, and the unemployment rate fell to 6.2 percent in November from October’s 6.6 percent.
     Chile’s central bank aims for inflation of 3.0 percent and the bank reiterated its “commitment to conduct monetary policy with flexibility” to ensure that inflation meets its target.

     Economists are starting to pencil in rate increases by the central bank later this year due to continued strong economic growth that is expected to lead to higher inflation.
    In December Chile’s inflation rate eased to 1.5 percent in December from 2.1 percent in November.
    The central bank forecasts that Chile’s economy expanded by 5.5 percent in 2012 with growth easing slightly this year. The International Monetary Fund forecasts 2013 growth of 5.0 percent, down from 5.9 percent in 2012.
    “Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook,” the central bank said in a statement.

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