WRAPUP 3-Chile cenbank boosts 2010 growth view, Aug CPI dips

* Central bank sees 2010 GDP growth of 5.5-6.5 percent

* Inflation seen at 3.9 percent in 2010

* Bank says to continue rate hikes, pace uncertain
(Adds link to graphic on Chile’s economy)

By Antonio de la Jara

SANTIAGO, Sept 8 (BestGrowthStock) – Chile’s central bank raised
its 2010 economic growth forecast to between 5 and 5.5 percent
and sees stable inflation as the world’s top copper producer
emerges from February’s devastating quake, the bank said on
Wednesday.

As domestic demand picks up the bank plans to continue
raising its benchmark rate, but the pace will depend on
domestic and external factors, according to the quarterly
monetary policy report. The bank started to raise rates in
June, joining Brazil and Peru in a rate upcycle driven by rapid
regional growth amid the global downturn.

“We foresee that the rate normalization will continue to be
gradual, but its level will remain expansive for several
quarters,” Central Bank President Jose De Gregorio said in a
speech to the Senate.

The bank had previously trimmed its growth outlook twice to
a view of between 4.0-5.0 percent following the Feb. 27
disaster that ravaged key steel, oil refining and forestry
industries in south-central Chile.

However, increased domestic demand driven in part by
reconstruction spending and high copper prices has helped boost
Chile’s economy as the global recovery falters.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a TAKE A LOOK on Chile economy, see [ID:nN30113748] For a graphic, see http://link.reuters.com/cen32p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The bank forecast the economy of the key, salmon, wood pulp
and wine producer would grow between 5.5 and 6.5 percent in
2011 due to low comparative figures in early 2010, which is in
line with President Sebastian Pinera’s own target of 6 percent
annual growth in average during his term.

“We continue to see an economy that in coming months should
continue to show dynamism in line with the central bank’s
growth expectations and cyclical trends,” said Mario Arend,
head economist with Celfin Capital in Santiago.

CONSUMER PRICES DIP

Amid steep economic growth expectations the bank increased
only slightly its 2010 inflation outlook to 3.9 percent from
the previous 3.8 percent. It saw inflation of 3.2 percent in
2011.

Chile’s consumer price index (CLCPI=ECI: ) dropped 0.1
percent in August, below market forecasts and driven by a
reduction on the stamp tax, transport, recreation and
communications, the government reported on Wednesday. For more
see, [ID:nN0845711]

Despite the fall in consumer prices, local and Wall Street
analysts stuck with their earlier forecasts that the central
bank will hike its benchmark rate by another 50 basis points to
2.50 percent at its Sept. 16 monetary policy meeting. For more
see, [ID:nN0887558].

The bank said in its report that new macro-economic
projects considered a rate normalization pace similar to that
of several polls.

An influential central bank poll of financial players
showed on Wednesday the market expects the rate at 4.0 percent
in six-months time and 5.0 percent in 12-months time. For more
see, [ID:nN0887558]

August CPI had been forecast to rise 0.2 percent in a
Reuters poll.

The Chilean peso was unfazed by the surprise fall in
consumer price data and new economic projects, traders said.
The peso was trading slightly weaker at 497.90/498.40 per
dollar.

The central bank reiterated the peso was trading at levels
within long-term fundamentals, which some analysts say is a
sign the bank has no immediate plans to intervene in the local
currency that has quickly appreciated since July.

For the bank’s monetary policy report, please go
to:http://www.bcentral.cl/eng/publications/policies/pdf/mpr092010sum.pdf

For the INE’s report on August inflation, please go
to:http://www.ine.cl/filenews/files/2010/septiembre/pdf/IPC_142_web.pdf

(Additional reporting by Maria Jose Latorre, Felipe
Iturrieta and Molly Rosbach; Writing by Alonso Soto, Editing by
Andrew Hay)

WRAPUP 3-Chile cenbank boosts 2010 growth view, Aug CPI dips