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WRAPUP 1-Chile March CPI slows, rate seen on hold
April 5, 2012 / 3:02 PM / 6 years ago

WRAPUP 1-Chile March CPI slows, rate seen on hold

* 12-mth CPI to March drops below cbank target range ceiling
    * Economic activity expands 6.1 pct in Feb yr/yr
    * March CPI, IMACEC to likely support cbank's rate hold

    By Antonio De la Jara and Anthony Esposito	
    SANTIAGO, April 5 (Reuters) - Chilean inflation eased in
March and economic activity was firm in February, data showed on
Thursday, suggesting the central bank will hold its key rate at
5.0 percent in the coming months.	
    Chile's consumer price index rose 0.2 percent in
March, the government statistics agency said, coming in
significantly below expectations for a 0.5 percent increase, as
higher prices for food and school-related goods were somewhat
offset by a drop in transport costs. 	
    Chile's economic activity grew 0.1 percent in February from
January, led by gains in retail, manufacturing and mining, and
rose 6.1 percent in February year-over-year, coming
in below market expectations for 6.4 percent growth.
    "The very favorable March inflation report and solid but not
overly exuberant expansion of the economy are likely to keep the
central bank on hold for the foreseeable future," said Goldman
Sachs economist Alberto Ramos in a note to clients.	
    The Chilean peso weakened on Thursday morning after
the CPI data, as a higher inflation rate in March likely would
have increased pressure on the monetary authority for a rate
increase in the world's top copper producer. 	
    The central bank cut rates in January, the first reduction
in 2-1/2 years, on fears that slowing global demand would hit
the export-dependent country, but the slowdown in Chile has so
far been softer than expected.	
    "Important risk scenarios remain," bank president Vergara
said in a presentation on Thursday, emphasizing the string of
stronger-than-expected economic data was insufficient to
indicate Chile had dodged a sharp slowdown.	
    Vergara said the bank isn't contemplating intervening in the
local foreign exchange market, as it did last year to tame a
strong peso, and said frictions there had eased. 	
    The rate is now at levels neutral to the economy, he said,
though the market sees rates increasing by year-end on an uptick
in inflation in December and February and a healthier global
economic outlook.  	
    Chile's central bank on Tuesday raised its 2012 economic
growth forecast to between 4.0 percent and 5.0 percent from 3.75
percent and 4.75 percent and raised its inflation view to 3.5
percent from 2.7 percent. 	
    Core CPI did not register changes in March, and inflation in
the 12 months to March was 3.8 percent, retreating below the 4.0
percent ceiling of the central bank's tolerance range for the
first time since November.  	
    Inflation in Brazil and Colombia also slowed in March, data
showed on Thursday.   	
    Chile's February IMACEC data marks the second consecutive
month the seasonally-adjusted growth rate for economic activity
slowed from the previous month. Chile's economy grew 0.3 percent
in January from December, the central bank has said, and grew
1.3 percent in December from November.  	
    The central bank calculates its month-on-month IMACEC data
in seasonally adjusted terms. The monthly IMACEC measures more
than 90 percent of the components comprising Chile's gross
domestic product, which is published quarterly.

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