Chile Holds Interest Rate Steady

The Central Bank of Chile maintained its policy rate at 4.5% in a unanimous March decision, citing a significant increase in uncertainty regarding the global economic outlook due to the war in the Middle East. The board noted that an initial external boost early in the year has been overshadowed by rising oil prices around $100 per barrel and tighter global financial conditions, while copper prices have decreased from their recent peaks despite remaining above previous IPoM forecasts. Domestic activity closed 2025 with 2.5% growth, though January Imacec performance was lower than expected due to supply factors in mining and agribusiness while private consumption and investment remained dynamic. The labour market showed little change with the unemployment rate steady and job creation remaining limited. Inflation showed a reduction with headline inflation at 2.4% and core inflation at 3.3% in February, though short-term expectations have risen relevantly due to fuel prices.

The Central Bank of Chile maintained its policy rate at 4.5% in a unanimous January decision, citing a more supportive external backdrop and continued progress on disinflation. The board noted improved global conditions, highlighted somewhat stronger US activity and higher copper prices above levels at the previous meeting while warning that geopolitical fiscal and financial risks persist. Domestically activity and demand have broadly matched the September IPoM, with short-term indicators for consumption and investment in line with expectations, even as the Imacec total and non-minero contracted 0.6% and 0.5% month on month in November. The labour market showed little change with the unemployment rate steady and job creation remaining limited. Inflation eased toward target with headline inflation at 3.5% year on year and core inflation at 3.3% in December, and two year inflation expectations remaining anchored at 3%, consistent with convergence to the target over the policy horizon.

The Central Bank of Chile cut its policy rate by 25 basis points to 4.5% in a unanimous December decision, citing a more supportive external backdrop and faster progress on disinflation. The board noted improved global conditions, supported by the US Federal Reserve’s December rate cut, expectations for further easing next year, firmer equity markets, and copper prices rising above $5 per pound. Domestically, activity and demand have broadly matched the September IPoM, with non mining GDP meeting expectations and investment, particularly in machinery and equipment, strengthening, even as overall growth was held back by a weak mining sector. The labour market has improved as the unemployment rate has declined in recent months, though job creation remains limited. Inflation has eased faster than anticipated, with both headline and core inflation at 3.4% year on year in November and two year expectations anchored near 3%, consistent with inflation converging to target by Q1 2026.