Thursday, August 16, 2012

Chile keeps rate steady, economy better than forecast

    The central bank of Chile kept its interest rate unchanged at 5.0 percent, as widely expected, and said domestic economic activity and demand was better than it forecast in June due to strong inventory stocking and consumption.
    Banco Central de Chile said international financial conditions had improved and strains in the euro zone had eased slightly.
   "However, uncertainty remains, the risk premium in some European economies remain very high and can not rule out a resurgence of these tensions in the coming months," the bank said in a statement following a meeting of its council. It added that growth was still weak in advanced economies and emerging markets had slowed more than expected.  
    The central bank noted that the "peso has appreciated" but it did not elaborate further.
    The bank has kept it's policy rate, known as TPM, unchanged since January when it cut the rate by 25 basis points.

    The bank said inflation remains under 3 percent - the central bank targets inflation of 3 percent plus or minus one percentage point - and volatile energy and food prices had a negative effect on consumer prices in recent months. This could, however, also reverse.
    "Inflation expectations in the policy horizon remain around the target," the bank said.
    In July Chile's inflation rate was 2.5 percent while GDP expanded by 1.4 percent in the first quarter for an annual growth rate of 5.6 percent.
    Financial markets were on the lookout for any mention by the central bank of the peso currency, which is one of the strongest performing currencies worldwide.
    Some exporters, including fruit exporters, have expressed concern that the strength of the peso was making exports difficult. Chile is also the world's largest copper producer.
    The central bank intervened in January last year when the peso was above 465 to the U.S. dollar. It was trading above above 483 today.




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