SANTIAGO: Chile's central bank is expected to raise its economic growth forecast and trim its inflation outlook for 2012 when its closely watched quarterly monetary policy report is issued on Wednesday, a Reuters survey of Chilean-based analysts showed.
They said the central bank will likely use the report to express a "wait and see" posture on interest rate policy as it weighs the potential impact of uncertain economic developments abroad.
The central bank in January cut its benchmark interest rate to 5 percent, and has kept it there since. It recently said that it considers that a "neutral rate," a stance expected to be maintained in Wednesday's monetary policy report.
In standard monetary policy parlance, a neutral interest rate neither spurs or curbs economic growth, all other factors being equal.
Four out of 10 analysts polled by Reuters see the central bank's monetary policy report (IPoM) raising the 2012 economic growth range estimate to between 4.75 percent and 5.25 percent from between 4.0 percent to 5.0 percent seen in the last IPoM issued in June.
For 2012 inflation, the bank is seen trimming its forecast to 2.3 percent from the 2.7 percent seen in the last quarterly IPoM, according to the median forecast of nine analysts surveyed.
World No.1 copper producer Chile has been prepping its export-dependent economy for possible fallout from a slowdown in demand from leading copper consumer China, but the Andean country has so far posted brisk growth and a tight labor market.
"I think recent data will trigger an acknowledgement of stronger growth and lower inflation than expected for this year," said Benjamin Sierra, economist with Scotiabank in Santiago. "But they're not going to substantially alter predictions for 2013."
Chile's seasonally adjusted gross domestic product growth picked up in the second quarter from the first quarter and expanded 5.4 percent in the first half of 2012 compared with a year earlier, the bank said last month.
Three of those polled see the central bank pushing up the 2012 GDP growth range to between 4.50 percent and 5.0 percent. Either way, the economy is seen cooling off after last year's 6 percent GDP growth.
Chilean consumer prices were flat in July as expected, government data showed last month and inflation in the 12 months to July slowed to 2.5 percent, approaching the floor of the central bank's 2.0 percent to 4.0 percent tolerance range.
While slower inflation could theoretically give the bank more room to ponder easing its monetary policy if the global outlook worsens, the bank is seen holding its key rate at 5.0 percent in the short-term as it monitors external developments.
"We think they'll maintain their 'wait and see' stance, because a neutral rate takes into account trade partners' (situation) as well as the domestic situation," said Alejandro Puente, chief economist with BBVA in Santiago. "The outlook could change at any moment, which is why monetary policy doesn't have a bias." In the last IPoM issued in June, the bank said its forecasts assumed the bank's benchmark interest rate will stay steady in the short-term.
Additionally, the central bank is seen reducing by a whisker its current forecast for this year's average copper price by 5 cents to $3.50 a pound, according to the median forecast of eight analysts polled by Reuters.
They saw Wednesday's IPoM cutting the average 2013 copper price forecast also by five cents to $3.35 a pound.
The bank is seen revising domestic demand growth, a pillar of the country's economy, to 5.5 percent this year from a previous forecast for 5.2 percent growth, according to the median forecast of six analysts surveyed by Reuters.
The central bank is scheduled to release its latest IPoM at 10:30 am (1330 GMT) on Wednesday.
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