Reuters: Financial Services and Real Estate: Chile cenbank could act if global slowdown bites

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Chile cenbank could act if global slowdown bites Jun 3rd 2012, 17:03 Sun Jun 3, 2012 1:03pm EDT * Most economists expect rates to stay on hold for now * Deputy cenbank governor says bank ready to act if needed SANTIAGO, June 3 (Reuters) - Chile's central bank could act aggressively if the global economic slowdown hurts the local economy, but interest rates will stay high unless the outlook is grave, the bank's deputy governor was quoted as saying on Sunday. The bank's monetary policy committee held the key interest rate at 5 percent in May for a fourth consecutive month as the economy slowed at a slower rate than expected, and most analysts expect it to remain steady in the coming months. "My impression is that, to the extent that we see evidence that the weakening in activity in the rest of the world is starting to affect us, then -- and not before that -- there should start to be a more aggressive monetary policy response," Deputy Governor Manuel Marfan, told newspaper El Mercurio. "The most likely scenario is that it doesn't come to that and that catastrophic things don't happen, so it's not practical to get ahead of ourselves," he added. "In the case, one would clearly expect the rates to remain relatively high." Marfan, the bank's deputy governor since 2009, said Chile had the necessary policy tools in case of a liquidity crunch caused by a sharp deterioration in the global situation, for example, if Greece leaves the euro zone. "Today, faced with a bigger crisis, it's unlikely that Chile would have any short-term liquidity problems," he said. Chile, the world's biggest producer of copper, could be hurt by a slump in prices for the red metal. The economy grew 5.6 percent in the first quarter and economic analysts expect expansion of 4.9 percent in April. Inflation expectations, meanwhile, are running below the bank's 3.5 percent forecast for the year. President Sebastian Pinera told the Reuters Latin America Investment Summit last week the economy was on track to grow 4 percent in 2012 despite the turbulence in Europe, saying his government was ready to activate a contingency plan if liquidity was under threat. Link this Share this Digg this Email Reprints

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