SANTIAGO (Reuters) - Chile's central bank maintains its neutral monetary policy bias and currently sees no need to act, the bank president, Rodrigo Vergara, said on Tuesday, saying that external risks currently outweigh domestic ones.
Short-term inflation risks have eased, while medium-term risks remain, but Chile's financial system, fiscal situation and banks are solid and Chile is well prepared to face any worsening of Europe's financial crisis, Vergara told the Reuters Latin America Investment Summit.
He said the bank was constantly monitoring and evaluating risks at home and abroad and has the instruments and room to act if liquidity were squeezed or the exchange rate were to fall out of alignment with fundamentals.
"We don't see it as something necessary or imminent at this time. Markets are functioning absolutely normally," Vergara said in an interview at his downtown Santiago office. "We see no weaknesses, imbalances or pressures that require imminent actions by the monetary authority.
"But we are prepared for the eventuality if need be," he added.
Vergara said the bank was closely monitoring events in China, the top consumer of copper, Chile's main export, as well as events in Europe. He said the peso, which has depreciated sharply against the dollar in recent weeks, was trading at reasonable levels, and saw no need for intervention on the horizon.
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With reporting by Moises Avila; Editing by Anthony Esposito and Leslie Adler