Chile central bank says keeping rate unchanged was only option amid global uncertainty, minutes show

SANTIAGO, April 7 (Reuters) - Chile's central bank said on Monday that the only plausible option at its March meeting was keeping the benchmark interest rate on hold at 5% due to risks facing the inflationary outlook.

The meeting minutes said that global economic uncertainty has greatly increased amid tariffs and other geopolitical risks, and that the inflationary outlook demands caution.

"The available background information pointed to significant risks facing the inflationary outlook, which reaffirmed the need for caution," the bank said, adding that the external outlook had become complex with a "significant increase in uncertainty."

Domestically, the bank noted that the peso had strengthened and the stock market had showed a positive performance compared to its January meeting, buoyed by the rise in copper price and global dollar.

It noted that while the appreciation of the peso since January had taken some inflationary pressure off, other elements needed further monitoring.

The bank noted said the short-term impacts of global economic downturn could mean higher inflation due to currency depreciation, but lead to deflationary pressures in the medium-term due to lower economic activity.

"In these circumstances, monetary policy would have more degrees of freedom as the process of convergence to the 3% target became more consolidates.