Chile central bank cuts interest rate to 5.25%

SANTIAGO (Reuters) -Chile’s central bank on Thursday said it was cutting its benchmark interest rate to 5.25% from a previous level of 5.50%, in a unanimous decision in line with analysts’ forecasts.

The bank said that if the economic scenario envisaged in its September report materializes, the rate “will see further reductions to meet its neutral level.”

The bank also reaffirmed its commitment to a flexible policy to bring inflation towards 3% within the next two years.

Analysts polled by the bank this month had predicted the 25-basis-point cut, pointing to lower risk of more medium-term persistency in inflation as related to shocks. They predicted the rate will hit 4.75% within five months.

The bank said global financial markets had registered fluctuations in oil and copper prices, fueled by the conflict in the Middle East and Chinese stimulus packages.

Chile is the world’s top copper producer.

Domestic activity and demand indicators are so far consistent with forecasts, it said, pointing to a positive mining performance and “relatively stable” consumption and investment.

Inflation forecasts for the coming year have edged down, it added, after inflation dropped to around 4% in September.