Chile traders raised their interest rate forecast for December after the central bank delivered its second-straight borrowing cost reduction and warned of a volatile exchange rate.

Policymakers will lower borrowing costs to 8% by the end of the year from the current level of 9.5%, above the prior estimate of 7.75%, according to a survey published by the central bank on Tuesday. Rates will fall to 5.25% in 12 months, compared with the previous forecast of 5%.

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Chile Traders Raise Key Rate Forecast as Peso Woes Spark Caution