SANTIAGO, July 28 (Reuters) - Chile's industrial output fell in June from May and copper output plunged, government data showed on Thursday, boosting views the central bank will hold its key rate again in August.
Chile's industrial production fell a seasonally-adjusted 1.8 percent in June compared with May, state statistics agency INE said, dragged down by the wood and chemicals sectors.
Output rose 4 percent in June from a year earlier, below expectations for a 6 percent rise and well under the 9.7 percent surge reported for May. Industrial output rose 2.9 percent in June last year.
"It's a natural process, an expected slowdown, but the Chilean economy continues to grow and is healthy," Finance Minister Felipe Larrain said.
Production of copper, the top export of the world's No.1 producer, tumbled 8.5 percent to 426,477 tonnes in June after a strike at the world's No.5 copper mine and heavy rains and power outages pummeled the sector.
"This is a very significant fall (in industrial production). In monthly terms, the drop is very unusual," said Ruben Catalan, an analyst at BCI Estudios.
The slowdown supports views Chile's central bank is near the end of its tightening cycle after an aggressive rate hike offensive dragged down inflation expectations and lifted the rate CLINTR=ECI to 5.25 percent, closer to a level seen neutral to the economy.
Neighboring Peru has left its own benchmark rate steady for the last two months, while policymakers in regional powerhouse Brazil hinted an interest rate tightening cycle there could be nearing an end despite global economic risks.
Eight of 12 analysts polled by Reuters on Thursday expect Chile's central bank to hold the rate steady at 5.25 percent, while three saw a 25 basis point increase. One declined to make a forecast.
"We were already expecting a pause (in interest rates) and this reinforces our view," said Catalan.
The peso, which is trading at more than 3-year highs this week, was also seen as a factor in the central bank's decision to hold interest rates steady in July for the first time in six months.
The currency has strengthened despite an ongoing $12 billion currency intervention program for 2011 launched in January that aims to weaken the currency.
Analysts say the bank's most likely courses of action include transitory measures like holding off from further rate hikes to avoid piling fresh upward pressure on the peso, or increasing the pace of its daily dollar purchases.
Chile's economic outlook is positive and authorities have the right tools to cope with significant risks posed by global financial turbulence, Chile's Central Bank President Jose De Gregorio said on Thursday.
"There are significant risks in the international arena, linked to fiscal and financial problems in developed economies." he said, citing debt woes in the United States and Europe.
De Gregorio said Chile's own economic outlook was favorable, with growth converging toward its potential, the unemployment rate normalizing and inflation moving around target.
"Chile is well-prepared but it is not immune, nor are we bulletproof to international crises," Larrain said after announcing the creation of a commission that will ensure closer cooperation between regulators and the central bank as they aim to avoid systemic risks.
Source:smm