May 18, 2017 / 10:42 PM / 2 months ago

UPDATE 1-Chile's central bank cuts interest rate, ends easing cycle

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(Adds comments from statement, context)

SANTIAGO, May 18 (Reuters) - Chile's central bank cut the benchmark interest rate to 2.50 percent on Thursday, a more rapid rate of loosening than the market had expected, and altered its bias to indicate its easing cycle was over.

The move means the bank has cut the interest rate 100 basis points in total so far this year, as it looks to address sluggish growth in the top copper exporter.

Recent central bank polls had indicated that a majority in the market expected the bank to pause in its easing this month and cut the rate in June, although a sizeable minority had flagged that a reduction in May was possible.

In the end the bank went with the earlier stimulus date, pointing to "important risks persisting" despite signs of improving external economic conditions.

But it changed its bias, previously geared towards loosening, to its neutral stance, saying that it would "conduct monetary policy with flexibility".

The bank would likely leave the rate on hold now until at least the first quarter of 2018, said Luis Felipe Alarcon, an economist at EuroAmerica.

Earlier on Thursday, the South American country reported its weakest quarterly growth since the 2009 financial crisis, although that was largely caused by one-off factors.

Nonetheless, the economy has struggled with weak investment on the back of the global commodities slowdown and business worries about local policy uncertainty. (Reporting by Santiago bureau; Writing by Rosalba O'Brien; Editing by Sandra Maler)

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