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UPDATE 2-Chile raises key rate to 3.25 pct; more hikes likely
October 15, 2015 / 9:44 PM / 2 years ago

UPDATE 2-Chile raises key rate to 3.25 pct; more hikes likely

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    SANTIAGO, Oct 15 (Reuters) - Chile's central bank raised its
benchmark interest rate 25 basis points to 3.25 percent on
Thursday and said further hikes were likely as it tries to rein
in stubbornly high inflation.
    The market had been split on whether the bank would hike the
rate or leave it at 3.0 percent as it has done
since October 2014, as top copper exporter Chile struggles with
sluggish growth.
    In the end, worries over persistently high inflation won
    "The future trajectory of the monetary policy rate considers
additional adjustments aimed to ensure the convergence of
inflation to target, at a pace that will depend on incoming
information and its implications on inflation," the central bank
said in its post-meeting statement.
    At its prior monetary policy meeting in September the bank
left the interest rate on hold but indicated a tightening of
policy in the short term was on the cards.
    "With this hike the bank made good on its promise and that
is very important in terms of credibility ... as things stand
today the most likely scenario is a rate pause in November and
we could see another hike later on," said Luis Felipe Alarcon,
economist with EuroAmerica in Santiago.
    Inflation has been at or above the bank's 2 to 4 percent
tolerance range for nearly a year and a half, in large part due
to a depreciating peso currency.
    The bank said it will continue to closely monitor inflation.
    Other Latin American economies have also begun rate raises
in a bid to tame inflation fanned by currency falls against the
dollar. Peru raised its rate in a surprise decision last month
and meets again on Thursday, while Colombia also raised
borrowing costs last month for the first time in a year.

 (Reporting by Gram Slattery, Anthony Esposito, Felipe Iturrieta
and Rosalba O'Brien; Editing by Andrew Hay)

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