UPDATE 1-Chile central bank holds benchmark rate at 5 percent

Tue Nov 13, 2012 9:53pm GMT

* Strong domestic activity offsets global threats
    * Chile's economy easing more slowly than forecast
    * Several Latin American central banks holding rates
    * Inflation expectations aligned with target-cenbank


    SANTIAGO, Nov 13 (Reuters) - Chile's central bank kept its
benchmark interest rate on hold at 5.0 percent, as expected, on
Tuesday for the 10th consecutive month as robust local growth
offset looming risks from a slowdown in global demand.
    Rates have stayed on hold since a cut in
January largely because the world's No. 1 copper producer has
shown better-than-expected resilience to slowing demand from top
trade partner China and fallout from the euro zone's crisis.
    "Domestically, output and demand indicators have evolved
above projections. The labor market remains tight," the central
bank said in its post meeting statement.
    Chile's export-dependent economy this year may post growth
of slightly more than the official forecast of 5 percent,
Finance Minister Felipe Larrain told Reuters last week, but he
kept to a growth outlook for 2013 of 4.8 percent, noting that
Chile faces slowing exports to Europe. 
    October's high CPI (Consumer Price Index) number was due to
one-time factors, the central bank said, adding, "Year-on-year
inflation is around 3 percent, while core inflation measures
remain below 3 percent. Inflation expectations over the policy
horizon are aligned with the target." 
    Chile's consumer prices rose by double what the market
expected in October, chiefly due to the cost of food,
non-alcoholic beverages, housing and electricity, the government
reported last week. 
    Inflation in the 12 months to October was 2.9 percent, just
below the 3.0 percent midpoint of the central bank's policy
horizon target.
    The benchmark interest rate is seen at 5.0 percent in five
and 11 months, the bank's latest poll of analysts showed on
Monday.
    "Altogether, domestic and external risks to activity and
inflation continue to broadly offset each other and this
condition underpins our call for no monetary policy action for
the foreseeable future," Goldman Sachs economist Alberto Ramos
said in a note to clients. 
    "The domestic economy continues to expand at a remarkably
solid pace, despite the challenging global backdrop, with demand
failing to decelerate to the originally envisaged more moderate
pace during (the second half of the year)," Ramos added.

 
    
    The central bank made no mention of Chile's peso currency
 in its statement, but said the U.S. dollar has
appreciated in international markets.
    Last week the bank started a temporary program to boost the
liquidity of the country's peso in financial markets to
"mitigate possible tensions towards year-end".
    The peso, which has gained around 6.9 percent versus the
dollar this year, ranks behind the Hungarian forint as the
strongest foreign currency performer against the U.S. dollar
among 152 currencies tracked by Reuters. 

    LATAM CENTRAL BANKS HELD RATES
    Chile's central bank isn't the only monetary authority
holding its fire in the region. 
    Brazil's central bank will likely keep interest rates at
their current record low of 7.25 percent until at least the end
of next year to help support a sluggish economic recovery, a
weekly central bank survey of economists showed on Monday.
 
    Colombia's central bank kept its benchmark interest rate
steady for a second-month running at 4.75 percent at its latest
meeting on Oct. 26, given a mixed picture for domestic growth
and the global economy. 
    Peru's central bank held its benchmark interest rate steady
at 4.25 percent for the 18th month in a row last week, as
inflation has retreated and the economy grows near its
potential.