Bloomberg News

Chilean Economists Put Back Forecast for Rate Increase

June 12, 2012

Chilean economists expect policy makers to keep interest rates unchanged at least 11 months, longer than previously forecast, as inflationary pressures ease in the Andean nation, according to a central bank survey.

Economists forecast the central bank will raise the key rate a quarter point to 5.25 percent within 17 months, according to the monthly poll published on the bank’s website today. Economists in May forecast a quarter-point increase within five months.

Inflation has slowed in the past three months, taking pressure off policy makers to raise borrowing costs. The central bank will keep rates unchanged for the fifth-straight month this week as it studies the impact the European sovereign-debt crisis will have on the world’s top copper producing nation, economist Florencia Vazquez said.

“In their opinion, domestic risks exactly offset external ones,” BNP Paribas’ Vazquez wrote in an e-mail to investors yesterday. “Against this backdrop, we do not think the central bank would act pre-emptively.”

The Chilean peso fell 0.3 percent to 504.9 per U.S. dollar at 8:40 a.m. in Santiago, from 503.61 yesterday. The currency will trade at 500 per dollar in two months, according to today’s poll.

Economic growth in the Andean nation will ease to 4.7 percent in 2012 after gross domestic product expanded 5.6 percent in the first quarter, according to the survey. Economists polled last month forecast economic expansion of 4.8 percent for 2012. The economy will grow 4.5 percent in May after it climbed 4.8 percent in April, according to the poll.

The labor market has tightened even as growth slows, with the unemployment rate unexpectedly dropping to 6.5 percent in the three months through April from 6.6 percent through March.

Economists estimate inflation will reach 3 percent in 11 months, compared with a forecast of 3.3 percent in the May poll. Inflation eased to 3.1 percent in May from 3.5 percent in April and 3.8 percent in March. Policy makers target 3 percent inflation, plus or minus 1 percentage point over two years.

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

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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