Chile's central bank will refrain from raising the benchmark lending rate from a record low of 1.75 percent as inflation remains under control, bank board member Manuel Marfan said.

The bank, which last increased the rate in March 2000, held it for a sixth month at its last policy-making meeting July 8. Consumer prices in June rose from the same month last year at a third the bank's 3 percent target range for 12 to 24 months.

“We are comfortable with this rate,'” said Marfan, 51, in an interview at the bank's Santiago headquarters.

The central bank probably will wait to raise rates until yearend, when faster economic growth will bolster consumer spending and spur companies to increase prices, said Miguel Varas, who helps manage about $3 billion of assets at Consorcio Financiero SA in Santiago, including central bank debt.

Companies are increasing investment in anticipation that lending rates will rise, Marfan said.

“The whole world knows that in the long-term the rate should be higher than the current one,'” he said.

The central bank expects inflation will end the year at 2.1 percent, down from 27 percent in 1990. Chile's annual inflation rate compares with about 6 percent in Brazil and 4 percent in Mexico.

Higher spending by Chileans and companies, and a jump in demand for copper, Chile's biggest export, will spark the fastest economic growth in Chile this year since 1997, according to central bank estimates. The bank expects the economy to expand as much as 5.5 percent this year, as the region grows 4 percent, according to United Nations estimates.

Chile's economic growth is quickening after miners such as BHP Billiton and Codelco increase copper production to take advantage of demand from China.

Source: Bloomberg