Chile Holds Interest Rate at 4.5%

The Central Bank of Chile kept its benchmark interest rate unchanged at 4.5% in a unanimous decision at its July meeting, holding borrowing costs for a fifth straight meeting, as widely expected. Policymakers said the macroeconomic outlook remains subject to greater-than-usual uncertainty as renewed US-Iran fighting pushed oil prices back to $100 per barrel and clouded the outlook for global supply. Domestically, economic activity weakened more than expected, with May's Imacec falling 0.9% year-on-year while investment and labor market conditions softened. Meanwhile, annual inflation accelerated to 4.3% in June, slightly above forecasts, as core inflation rose faster than expected and short-term inflation expectations increased alongside higher oil prices. However, inflation expectations two years ahead remained anchored at 3%. The board reiterated that it will assess policy meeting by meeting and take the measures needed to return inflation to its 3% target over a two-year horizon.

The Central Bank of Chile kept its benchmark interest rate unchanged at 4.5% at its June meeting. Policymakers noted that the balance of risks to inflation has become more even, although the macroeconomic outlook remains subject to elevated uncertainty. The conflict in the Middle East remains unresolved, and global oil supply has yet to normalize. At the same time, while economic activity has been affected mainly by temporary supply factors and demand prospects have changed little, several drivers of household consumption have evolved less favorably. As expected, headline inflation accelerated due to the shock from the Middle East conflict. Annual consumer price inflation rose to 3.9% in May, largely driven by higher fuel prices. However, core inflation has shown little change in recent months. The board reiterated that it will take the necessary measures to ensure inflation converges to its 3% target over a two-year horizon.

The Central Bank of Chile kept its policy rate unchanged at 4.5% in a unanimous decision in April 2026, citing persistent global uncertainty driven by the ongoing Middle East conflict. While oil futures still point to some easing, risks remain that energy and commodity prices stay elevated, fueling inflation risks. Still, equities recovered and currencies strengthened, while copper prices climbed around $6 per pound, above earlier projections. Domestically, activity softened, with non-mining output contracting 0.3% year-on-year in February due to supply disruptions. Consumption remained broadly stable, but investment slowed more than expected. The labor market saw little change, with steady unemployment and limited job creation. Inflation rose slightly above forecasts, with headline at 2.8% and core at 3.4%, while short-term expectations increased. Still, medium-term expectations remain anchored near the 3% target, as the central bank signaled a cautious, data-dependent approach ahead.