Chile's central bank holds benchmark rate as risks rise from Middle East war

SANTIAGO, April 28 (Reuters) - Chile's central bank on Tuesday held its benchmark interest rate at 4.5% in a unanimous decision, in line with expectations and marking its third consecutive decision to maintain the rate.

In a statement, Chile's central bank said the prolongation of the war in the Middle East was worsening forecasts for global inflation and economic activity, and increasing risks that oil prices will remain high.

Tuesday's decision follows two consecutive holds in January and March.

"Although oil price futures continue to point to a decline, the prolongation of the conflict has increased the risks that prices will remain high," the bank said, noting prices have settled above those envisioned in last month's monetary policy report.

It also said the course of the war so far has been "more adverse" than the baseline scenario of last month's report, noting that "the macroeconomic outlook remains subject to a higher-than-usual degree of uncertainty."

The central bank also pointed to higher copper prices. Chile is the world's top producer of the red metal, considered an economic bellwether due to its uses across many sectors.

For March, Chile recorded inflation up 2.8% from a year earlier, pushed up by higher transport costs and amid a steep hike in fuel prices conducted by the new government of President Jose Antonio Kast.

The measure, which seeks to bring domestic prices in line with surging international rates, hit Kast's popularity early in his term and triggered some protests that clashed with police.

Following the fuel costs hike, the central bank raised its 2026 inflation forecast to 3.6% from 2.9% previously, and trimmed its economic growth forecast to 1.5% to 2.5%, down from a prior range of 2% to 3%.

(Reporting by Natalia Ramos and Sarah Morland; Editing by Natalia Siniawski)