Chilean Traders See Rate Rise Next Year on Faster Inflation

Chilean traders and investors expect policy makers to raise the benchmark interest rate by January next year as economic growth boosts inflation rates in the Andean nation.

Policy makers will keep borrowing costs unchanged at today’s 5 percent through at least July this year before raising them to 5.25 percent by January 2014, according to a bi-weekly survey of traders and investors posted on the central bank website today. Traders and investors forecast annual inflation of 3 percent in 12 months, compared with the 2.9 percent estimate in the Dec. 24 survey.

Since the previous poll was published, economic growth exceeded estimates made by analysts for a fourth consecutive month. Still, policy makers are under little pressure to raise interest rates to cool gains in the economy after the inflation rate ended 2012 at its lowest point in two-and-a-half years.

“There are even more reasons for the central bank to keep the monetary policy rate on hold in the next meeting,” Banchile Inversiones analysts including chief economist Rodrigo Aravena wrote in a report e-mailed to investors yesterday. “Nevertheless, we believe there are elements both local and external that might justify a more restrictive tone.”

The peso rose by less than 0.1 percent to 471.95 per U.S. dollar at 8:37 a.m. local time today. Chile’s currency will trade at 470 per dollar in seven days, according to the median estimate of 57 traders and investors in today’s poll.

The economy of the world’s largest copper miner probably expanded 5.4 percent last year, which would be the fastest gain among major South American economies behind Peru, according to analysts in a separate survey conducted by Bloomberg.

Inflation in Chile eased to 1.5 percent in December from 2.1 percent in November, the lowest rate among Latin American nations tracked by Bloomberg. Policy makers in Chile target 3 percent inflation, plus or minus 1 percentage point over two years.

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