MercoPress. South Atlantic News Agency

Chile anticipates interest rate increase.

Consumer inflation in Chile last August reached 0,4% pushed by energy, housing and food prices, and above market analysts forecast of 0,3%, according to the latest report released last Friday.

In the eight months of 2004 accumulated inflation in Chile reached 2,2% and 1,6% in the last twelve months. This means that the Chilean Central Bank target of 2,1%, --in the range of 2 to 4%--, for the whole of 2004 has now moved to 3%.

Underlying inflation which does not include the volatile prices of energy and food was 0,2% in August.

The fact that inflation has moved faster than expected has triggered a debate about interest rates in Chile.

During the last twelve months the Chilean Central Bank has kept the basic rate at a historically low 1,75% to help boost consumption and investment after several years of slow growth

. However given the latest data and with oil close to 50 US dollars the barrel and the economy picking up at an annualized 4,5%, some market analysts and economists believe the moment has come to begin raising interest rates.

In one of its most recent reports the Central Bank anticipated that the moment to reduce monetary stimuli so as to make dynamic growth more compatible with a controlled inflation "is closing in".

Private financial consulting agencies estimate annual inflation in Chile will range between 2,7 and 2,9%, and therefore anticipate that the Chilean Central Bank Monetary Committee in its next meeting will raise the basic interest rate between 25 and 50 points.