Central Bank raises 2008 inflation forecast to 4.5%

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SANTIAGO.- Some of the major forecasts made by the Central Bank's Monetary Policy Report (IPOM) for January indicate a 4.5% rise in inflation from now until December 2008 along with an economic growth rate between 4.5% and 5.5% for the year.

The projected increase is considerably significant when compared to the September IPOM report, which had projected an inflation rate of 3.1% for December of 2008. Additionally, economic growth forecasts have fallen from September's previous projections of between 5 and 6%.

The GDP growth forecast for 2007 also took a dive, slipping from a range of 5.75%-6.25% to only 5.2%.

Concerning the exchange rate, which has dipped to a low of $470 CLP per U.S. dollar over the last few weeks, Central Bank President José De Gregorio pointed out that the issuing entity "reserves the ability to intervene in the exchange rate market if the macro financial stability of the economy is threatened".

De Gregorio also stated, however, that the monetary policy has been adjusted to "prevent the risk of a higher inflation rate spreading to other prices and costs". It is for this reason, he explained, that the benchmark lending rate has risen 25 base points during September, December and January to its current level of 6.25%.