Chile's key rate in range to keep inflation 3pc

SANTIAGO: Chile's key interest rate is within an acceptable range to keep inflation near its annual target of 3 percent, central bank President Jose de Gregorio said in a presentation released on the bank's site on Friday.

The bank held its key rate steady for a fourth month at 5.25 percent as expected on Thursday, and hinted the deterioration of the global economy could prompt it to cut rates.

"The rate is within a range normal and coherent with inflation remaining near target," De Gregorio said.

The bank on Wednesday said a domestic slowdown was more pronounced than expected, as woes in Europe and United States drag on the local economy.

Chilean inflation ticked up as expected in September, with the consumer price index rising 0.5 percent, following a 0.2 percent rise in August, driven by food, transport and tobacco, government data showed last week.

Inflation in the 12 months to September was 3.3 percent, a shade higher than August's 3.2 percent but still close to the central bank's annual inflation target, the data showed.

Financial woes in Europe and the United States have prompted a host of Latin American policymakers to end rate hikes and even eye a reversal. Peru, Colombia and Mexico are on hold, while Brazil unexpectedly slashed its benchmark rate to 12 percent from 12.5 percent in August.

Two Chilean central bank polls on Wednesday showed analysts and traders widely expect rates to be cut either in December or January.

Copyright Reuters, 2011