Chile raises rates

Economists had mixed views on whether the board would cut or hold rates this time.

The central bank said the action was "consistent with prospects of higher inflation due to recent surprises, and allows annual inflation to converge to 3% [the central bank's medium-term target] over the policy horizon."

Inflation in December - which took the annual rate of inflation to almost 8% - was, the central bank said, "surprisingly high". Inflation expectations for the coming quarters had also risen, but remained close to the 3% target in the medium-term.

The increasing likelihood of an economic slowdown in the United States and the higher-than-predicted prices of oil, copper and food had led to a greater risk of an economic downturn in Chile.

Further hikes "may be necessary in order to ensure convergence of inflation to the target," the central bank said, adding that the unfolding of the international scenario, the evolution of the output gap and the potential propagation of recent inflationary shocks to other prices were "particularly important for this."

To read the central bank's press release, click here