(Adds central bank and finance minister’s comments)
SANTIAGO, March 12 (Reuters) - Chile’s central bank has no space for additional monetary stimulus in the foreseeable future, but it will use its policy tools to comply with its inflation mandate, bank chief Rodrigo Vergara said on Thursday.
Tasked with propping up a slowing economy as investment dried up and consumption cooled, the bank cut the benchmark interest rate by 200 basis points between October 2013 and October 2014 to its current 3.0 percent.
But stubbornly high inflation, with the annualized figure remaining above the bank’s 2-percent-to-4-percent target range for nearly a year, has kept policy makers from lowering rates further.
Speaking to an audience of Chile’s business leaders, Vergara said he was not satisfied with expectations that inflation would remain above the bank’s target range for longer than initially anticipated. He underscored the bank’s commitment to using the “policy tools” at hand to comply with its inflation mandate, without specifying what tools he was referring to.
Chile’s economy, which relies heavily on copper exports and consumer demand, expanded 1.8 percent in 2014, the slowest since a 2009 recession.
In the most likely scenario, economic growth and domestic demand will pick up, particularly in the second half of the year, Vergara said.
The IMACEC economic activity index, which covers about 90 percent of the economy tallied by gross domestic product figures, rose 2.9 percent in December and 2.7 percent in January from a year earlier.
Finance Minister Alberto Arenas, who spoke at the same event as Vergara, cautioned that IMACEC data would not necessarily post a steady rise in coming months and could fluctuate.
“But what’s important is the trend,” said Arenas, “and in that sense, the average growth rate should increase.” (Reporting by Fabian Cambero; Writing by Anthony Esposito; Editing by Chizu Nomiyama and Lisa Von Ahn)