Chile Policy Makers Unanimous on September Rate Decision

Chilean policy makers were unanimous in their decision to keep the benchmark interest rate unchanged at 5 percent last month, and didn’t discuss a rate increase or cut, minutes of the meeting showed.

The central bank last changed borrowing costs in January, when it made a quarter-point reduction that surprised economists surveyed by Bloomberg. A tight labor market ruled out another rate reduction, while slower inflation removed pressure for an increase, according to the minutes posted on the central bank website today.

Policy makers lowered their inflation forecast and raised growth estimates the week before the meeting, indicating that borrowing costs would remain at current levels in the short term. Still, changes in the global economy may rapidly alter the outlook for Chile, board member Sebastian Claro wrote in a presentation yesterday.

“In the aggregate, external conditions faced by Chile’s economy are favorable for now,” he wrote in the presentation posted on the bank website. “The favorable conditions -- raw material prices and foreign interest rates -- are transitory in part. They also could change significantly if the external situation deteriorates.”

Chile’s peso, which has gained 9.6 percent against the U.S. dollar this year, slid 0.2 percent to 474.11 per U.S. dollar at 8:44 a.m. Santiago time.

Inflation Forecast

Policy makers, who target 3 percent inflation plus or minus 1 percentage point over two years, on Sept. 5 lowered their 2012 inflation forecast to 2.5 percent from the 2.7 percent estimated in June. They also raised their economic growth estimate to between 4.75 percent and 5.25 percent from 4 percent to 5 percent.

Gross domestic product in the world’s leading copper producer rose 5.5 percent in the second quarter from 2011, the fastest expansion in a year. Inflation slowed to 2.6 percent in August from 4.2 percent in the first month of this year.

Chile’s two-year interest rate swap, which reflects traders’ views of average borrowing costs, declined 11 basis points, or 0.11 percentage point, to 4.86 percent yesterday from last month’s meeting of policy makers.

To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.