Chilean Economists Forecast Earlier Benchmark Rate Increase

Chilean economists expect policy makers to raise interest rates this year as inflation accelerates, after forecasting no change in borrowing costs for all of 2013 in a poll published last month.

Policy makers will keep borrowing costs unchanged at today’s 5 percent for at least five months before raising them a quarter-point by year-end, according to a monthly survey posted on the central bank website today. The analysts polled in December by the bank expected rates to reach 5.25 percent within 17 months after remaining unchanged this year.

Economists forecast the economy will expand 4.8 percent this year and 5 percent in 2014, exceeding the nation’s average growth rate of 4.4 percent in the decade through 2011. While inflation will accelerate in 2013, the economic expansion still won’t be enough to push the inflation rate above the bank’s target range of 2 percent to 4 percent, according to the poll.

“Recent speculation that the strength of the local economy would cause inflation to accelerate has so far proven wide of the mark,” Michael Henderson, emerging markets economist at Capital Economics, wrote in a note e-mailed to investors yesterday.

The peso rose 0.16 percent to 470.58 per U.S. dollar at 8:43 a.m. Santiago time. Chile’s currency will trade at 475 per dollar in two months, according to the median estimate of 59 analysts in today’s poll.

Inflation in the world’s top copper miner slowed to 1.5 percent last month from 2.1 percent in November even after economic growth exceeded analyst estimates in eight of the past 12 months. Inflation will end 2013 and 2014 at 3 percent, economists said in the survey.

Before it's here, it's on the Bloomberg Terminal.