SANTIAGO, Dec 31 (Reuters) - Chilean President Michelle Bachelet, citing easing inflation, hinted on Wednesday she hoped the central bank would cut benchmark interest rates, which are at their highest level in a decade.
'Inflation frankly is retreating and I think that will be a criteria the central bank will have to evaluate when it defines its interest rate policy,' Bachelet told Radio Cooperativa in an interview.
'So I hope, though I am respectful of the central bank's autonomy ... I think that the data we are seeing herald some good decisions,' she added, forecasting Chilean 12-month inflation, which is running near 14-year highs, would ease to around 7.5 percent by the year-end.
Central Bank President Jose De Gregorio this month hinted that the bank would cut rates in coming months, saying he expected sharp reductions in monthly inflation.
The central bank said on Tuesday said its monetary policy board members agreed that Chile would probably enter a cycle of monetary easing.
The bank's board weighed a 25 basis point rate cut this month, but voted in the end to hold rates at 8.25 percent, their highest level in 10 years.
Chile's November consumer price index fell 0.1 percent, less than expected, but core inflation -- which does not include fresh produce or fuel prices -- rose 0.6 percent.
The November consumer price index brought 12-month inflation down to 8.9 percent from 9.9 percent the prior month, but the rate is still around 14-year highs and is nearly three times the central bank's target annual inflation rate of 3 percent.
Bachelet said a sharp fall in prices for main export copper meant Chile was likely headed for a fiscal deficit, but said more than $20 billion of windfall earnings saved in sovereign wealth funds would serve as a cushion in the face of global financial crisis.
Chile is the world's No.1 copper producer and the red metal is a main earner for the state.
'With the fall in copper prices, the cost of production, and less output, the truth is we will probably see less revenue,' Bachelet said.
'Now we will have those savings, which must serve for times of lower revenues,' she added. 'It gives us a cushion at a time when we are probably going to have a fiscal deficit.'
(Reporting by Antonion de la Jara and Simon Gardner, Editing by Chizu Nomiyama) Keywords: CHILE/ECONOMY PRESIDENT (simon.gardner@thomsonreuters.com; +562 370 4250; Reuters Messaging: antonio.delajara.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
'Inflation frankly is retreating and I think that will be a criteria the central bank will have to evaluate when it defines its interest rate policy,' Bachelet told Radio Cooperativa in an interview.
'So I hope, though I am respectful of the central bank's autonomy ... I think that the data we are seeing herald some good decisions,' she added, forecasting Chilean 12-month inflation, which is running near 14-year highs, would ease to around 7.5 percent by the year-end.
Central Bank President Jose De Gregorio this month hinted that the bank would cut rates in coming months, saying he expected sharp reductions in monthly inflation.
The central bank said on Tuesday said its monetary policy board members agreed that Chile would probably enter a cycle of monetary easing.
The bank's board weighed a 25 basis point rate cut this month, but voted in the end to hold rates at 8.25 percent, their highest level in 10 years.
Chile's November consumer price index fell 0.1 percent, less than expected, but core inflation -- which does not include fresh produce or fuel prices -- rose 0.6 percent.
The November consumer price index brought 12-month inflation down to 8.9 percent from 9.9 percent the prior month, but the rate is still around 14-year highs and is nearly three times the central bank's target annual inflation rate of 3 percent.
Bachelet said a sharp fall in prices for main export copper meant Chile was likely headed for a fiscal deficit, but said more than $20 billion of windfall earnings saved in sovereign wealth funds would serve as a cushion in the face of global financial crisis.
Chile is the world's No.1 copper producer and the red metal is a main earner for the state.
'With the fall in copper prices, the cost of production, and less output, the truth is we will probably see less revenue,' Bachelet said.
'Now we will have those savings, which must serve for times of lower revenues,' she added. 'It gives us a cushion at a time when we are probably going to have a fiscal deficit.'
(Reporting by Antonion de la Jara and Simon Gardner, Editing by Chizu Nomiyama) Keywords: CHILE/ECONOMY PRESIDENT (simon.gardner@thomsonreuters.com; +562 370 4250; Reuters Messaging: antonio.delajara.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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