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Chile central bank board sees rate hike at year-end, minutes show


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Chile central bank board sees rate hike at year-end, minutes show

Banco Central de Chile's monetary policy board ruled out lowering its policy rate and is eyeing a hike towards the end of the year, minutes from its last meeting show.

The committee, which in July unanimously decided to maintain the key interest rate at 2.5%, does not see the need to lower the rate at present, due to the favorable macroeconomic scenario in Chile and less inflationary risks, according to the minutes.

Instead, the board members consider the central bank should look to start a "process of normalization" by increasing the rate to "more neutral stance."

Annual CPI inflation rose to 2.5% in June from 2% in May, in line with forecasts. The central bank's projects inflation to reach 3% over the two-year horizon.

Copper price key for Chile

Meanwhile, Mario Marcel, the president of the central bank, reportedly said price of copper will have a big effect on Chile's economic performance during a trade war between the United States and China.

While exchange rates tended to put pressures on inflation, a trade war was likely to have a contraction effect on Chile, which would reduce the pressure on inflation, making the balance of these two trends a key element for the central bank to monitor, Marcel said at an event, according to a report by Diario Financiero.

"The price of copper plays a very important role in this sense because its response to the trade war depends to a large extent on how much it affects the economic performance of China. It's a component that we have to monitor very carefully," the central bank president reportedly said.