Chile central bank weighed March rate hike as war fuels inflation risks

April 1 (Reuters) - Policymakers at Chile's central bank briefly considered raising interest rates at their March meeting in the face of uncertainty stemming from the U.S.-Israeli war on Iran, the meeting minutes showed on Wednesday.

The bank's board unanimously voted to hold its benchmark rate at 4.5%, calling it the most plausible decision, but "several members noted that it was reasonable to give some thought to the option" of a 25-basis-point hike.

Policymakers agreed the conflict delivered a significant supply shock, citing the recent surge in oil prices and logistical issues, which they said could prove more long-lasting even if the conflict were to subside.

"If the energy and food shocks were large or prolonged, they could have a significant pass-through to core inflation and pricing decisions," the bank said, adding that implementing monetary policy had become more complex.

One board member argued that a preemptive hike could help contain inflationary pressures, but would be premature and costly given current uncertainty, the minutes showed.

"There was agreement that monetary policy should be reassessed at each meeting, based on how events unfolded and affected the convergence of inflation to the target," the central bank added.

Chile has a 3% inflation goal, plus or minus 1 percentage point, and is expected to publish the inflation data for March next Wednesday.

Annual inflation stood at 2.4% in February, the lowest in six years. But the central bank said the impact of the war on global fuel prices would likely push inflation to around 4% from the second quarter, returning to 3% only in 2027.

A steep fuel price hike announced by the government of President Jose Antonio Kast, inaugurated on March 11, took effect late last month as the administration moved to bring domestic prices in line with surging international rates.

(Reporting by Gabriel Araujo; Editing by Aida Pelaez-Fernandez)