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Chile Bank Voted Unanimously to Raise Rate to 7.75%

Sunday, August 31st 2008 - 21:00 UTC
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Chile's central bank governor Jose de Gregorio Chile's central bank governor Jose de Gregorio

Chile's central bank policy makers voted unanimously to increase interest rates at their last meeting by half a percentage point for the third straight month.

Central bank president Jose De Gregorio lifted borrowing costs to 7.75 percent to help stem the fastest inflation in 13 years. The bank published minutes from the Aug. 14 meeting on its Web site. The bank's board considered a half- or three-quarter point increase, with a half-point rise implying future interest-rate rises, according to the minutes. The policy makers felt that the ''inflationary scenario'' was deteriorating and that the annual pace of price increases would remain near its current level in coming months, according to the minutes. ''With regards to the future evolution of the monetary policy rate, all the directors agreed that further increases would be necessary,'' to slow inflation toward the bank's 3 percent target, the minutes said. Three consecutive rate increases may have helped slow annual inflation to 9.3 percent in August from the 9.5 percent rate of June and July, according to the median estimate of nine economists in a Bloomberg survey. The bank will raise rates on Sept. 4, according to nine of 10 economists in a Bloomberg poll. Five economists expect a half-point increase to 8.25 percent, while four see a quarter- point increase to 8.00 percent, the highest in almost a decade. The bank is struggling to prevent high food and energy prices from spreading to other parts of the economy after the cost of food rose 18 percent in the 12 months to the end of July and electricity rose 29 percent. Monthly core inflation, which excludes fuel and perishable food, was 1.1 percent in July, the highest in a decade. The peso rose for a third day, rising 0.5 percent to 511.95 per dollar at 11:11 a.m. New York time from 514.73 late yesterday.

Categories: Economy, Latin America.

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