SANTIAGO, Oct 17 (Reuters) - Chile's central bank on Thursday cut its benchmark interest rate by 25 basis points to 5.25%, extending an easing cycle since the middle of last year, and predicted further cuts ahead if the copper-producing country's economic picture remains stable.

The cut, a unanimous decision in line with forecasts, comes as inflation cools, but as the world's top producer of red metal copper faces a challenge to rev up growth. Copper output has been stalling in recent years.

The bank said that if the economic scenario continued as expected, then the Andean country's interest rate "will see further reductions to meet its neutral level."

Pantheon Macroeconomics' Chief Latin America Economist Andres Abadia said that he expected more cuts ahead, though greater external risks and shifting domestic conditions meant a pause in the easing cycle could not be ruled out.

"For now, we expect further rate cuts in upcoming meetings, targeting at least 4.0% by the late second quarter of 2025," he said. "A pause in the normalization cycle cannot be ruled out if external conditions deteriorate sharply."

Analysts polled by the bank this month had predicted the 25-basis-point cut, pointing to lower risk of more medium-term persistency in inflation as related to shocks. They predicted the rate will hit 4.75% within five months.

The bank said global financial markets had registered fluctuations in oil and copper prices, fueled by the conflict in the Middle East and Chinese stimulus packages. China is the top buyer of Chile's copper exports.

Domestic activity and demand indicators are so far consistent with forecasts, it said, pointing to a positive mining performance and "relatively stable" consumption and investment.

Inflation forecasts for the coming year have edged down, it added, after inflation slowed to 4.1% in September, from 4.7% the previous month.

The bank also reaffirmed its commitment to a flexible policy to bring inflation towards 3% within the next two years.

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https://www.reuters.com/markets/rates-bonds/chile-central-bank-cuts-interest-rate-525-2024-10-17/