Reuters: US Dollar Report: UPDATE 1-Chile cbank weighed only rate hold in September-minutes

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UPDATE 1-Chile cbank weighed only rate hold in September-minutes Oct 3rd 2012, 12:27 Tweet Share this Email Print Wed Oct 3, 2012 8:27am EDT * Rate remains within a neutral range-cbank minutes * Decision to hold key rate was unanimous * Cbank to monitor rise in current account deficit SANTIAGO, Oct 3 (Reuters) - Chile's central bank considered only keeping its key interest rate on hold as an option in September, when it held it steady at 5.0 percent for an eighth consecutive month, as expected, minutes of the meeting showed on Wednesday. The rate remains within a neutral range and the decision to keep the rate steady was unanimous, the minutes said. The bank held its key interest rate steady in September as healthy economic growth and demand at home counterbalance an unwelcome global backdrop. The central bank highlighted that an expected domestic economic slowdown had thus far been softer than anticipated and expressed concern about a recent rise in Chile's current account deficit. "The increase in domestic consumption has been reflected in a rise in the current account deficit. Were (this rise) to persist and grow, it could be a point of economic and financial vulnerability amid sharp drops in the terms of trade or a reduction in the supply of international financing," the minutes said. The monetary authority said it would continue to monitor this situation. Chile, the world's top copper producer, posted its largest trade deficit in August since the height of the global financial crisis nearly four years ago, as exports of the metal slipped below the $3.0 billion mark for the first time since June 2010. One bank board member pointed out the Chilean peso's real appreciation had picked up in recent weeks, due to "external events." Chile's stronger-than-expected economic performance has helped the peso appreciate over 9.5 percent versus the U.S. dollar this year. Along with the Hungarian forint, it ranks as the strongest performer against the dollar among the 152 currencies tracked by Reuters. The central bank may intervene in the foreign exchange market to stem the peso's strength if such a move is justified, bank president Rodrigo Vergara said on Friday. Chile's central bank is seen holding its key interest rate at 5.0 percent again at its monetary policy meeting on October 18, and it is also seen at that level in three and six months, the bank's fortnightly poll of traders showed last month. Chile has proved surprisingly resilient to the euro zone debt crisis so far this year, but economic growth in the small, export-dependent country is seen slowing in 2013 on ebbing global demand. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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