Bloomberg News

Chilean Economists Forecast Interest Rate Cut in December

October 12, 2011

(Updates with rate forecasts through September in second paragraph; comment from analyst in third, fourth paragraphs.)

Oct. 12 (Bloomberg) -- Chilean economists expect the central bank to reduce its benchmark interest rate to 5 percent in December, the first cut in more than two years, according to a monthly survey posted today on the central bank’s website.

The key rate will fall to 4.75 percent by March and 4.5 percent by September, the survey showed. In last month’s survey, economists forecast the first rate cut wouldn’t come until next year.

The central bank, which last reduced interest rates in July 2009, may cut borrowing costs as soon as this week as a proactive measure to mitigate the impact on Chile of a global economic slowdown, Cesar Guzman, head of macroeconomic research at Inversiones Security, said in a note to investors yesterday.

“The central bank is ready to reduce the monetary policy rate,” he wrote in the e-mailed report. Accelerated inflation in September as well as gains in spending and salaries “could delay the start of the monetary stimulus until November.”

Three-month interest rate swaps, which reflect traders’ views of rate decisions, rose 1 basis point, or 0.01 percentage point, to 5.18 percent at 9:14 a.m. in Santiago.

Inflation, which quickened to 0.5 percent in September from 0.2 percent in August, will slow to 0.3 percent in October, according to the survey of economists. Annual inflation will accelerate to 3.4 percent in December from 3.3 percent in September, the poll showed.

According to a separate survey of traders and investors released today by the central bank, the key interest rate will remain at 5.25 percent this week and drop to 5 percent in three months.

--With assistance from Sebastian Boyd and Eduardo Thomson in Santiago. Editors: Philip Sanders, James Attwood.

To contact the reporter on this story: Randall Woods in Santiago at rwoods13@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net


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