(Recasts, adds comments from economists, background details)
SANTIAGO Jan 6 Inflation in Chile continued to
quickly subside in December, which combined with weak economic
growth data should pave the way for the central bank to cut its
benchmark interest rate for the first time in over two years on
The consumer price index fell 0.2 percent in
December as prices for food and non-alcoholic beverages as well
as recreation and cultural activities decreased, the
government's INE statistics agency said on Friday.
That was below a Reuters forecast for a 0.1 percent
Inflation in the 12 months to December was 2.7 percent, on
the lower end of the central bank's 2 percent to 4 percent
target range, while core inflation was 0.0 percent in December,
the INE said.
"Combined with the continued string of weak activity data
...December's bigger-than-expected drop in inflation probably
seals the deal for a January rate cut," said Edward Glossop,
Latin America economist for Capital Economics.
Chile's economic activity rose a
lower-than-expected 0.8 percent in November from the same month
a year earlier, as mining activity and retail increased, central
bank data showed on Thursday.
"Both the minutes and the statement accompanying the central
bank's last policy meeting had already struck a dovish tone and
effectively prepared the ground for near-term easing," added
Minutes of the last monetary policy meeting in December
revealed one of the bank's four board members dissented from the
majority decision the first time in 15 months. The decision was
to keep the benchmark interest rate steady but one
member recommended a cut of 25 basis points.
Meanwhile, the bank said in its December quarterly monetary
policy report that it saw two interest rate cuts of 25 basis
points over the two-year policy horizon.
(Reporting by Anthony Esposito; Editing by Mark Potter and