Chile: Central Bank of Chile stands pat in June
Interest rates held at 4.50%: On 16 June, the Central Bank of Chile held its policy rate at 4.50%, as expected by markets—as a result, rates remained at their lowest level since January 2022.
Balanced inflation risks keep the Bank on hold: The Bank judged that a rate cut was not yet warranted because headline inflation had risen following the oil price shock linked to the Middle East conflict, while geopolitical uncertainty remained elevated. At the same time, there was no need to tighten policy further, as core inflation has remained contained, medium-term inflation expectations have stayed anchored around the 3% target, and domestic demand has shown signs of weakening through softer investment, decelerating household consumption and a deteriorating labor market.
Geopolitical uncertainty calls for caution: The Board reiterated that future policy decisions will be made on a meeting-by-meeting, data-dependent basis, with the policy path determined by how inflation and economic conditions evolve. While easing tensions between the U.S. and Iran have reduced extreme oil price risks, policymakers emphasized that geopolitical developments remain highly uncertain and that they will closely monitor both external shocks and the response of domestic demand. The vast majority of our panelists see rates on hold through year-end, with rates ending 2026 close to end-2025 levels.
The Bank will reconvene on 28 July.
Panelist insight: Itaú Unibanco analysts commented on the outlook:
“Our baseline scenario considers rates remaining on hold at 4.5% for the foreseeable future. The combination of still-elevated headline inflation and contained core dynamics supports a prolonged pause, as the central bank monitors second-round effects and expectations. With oil prices falling and inflation having accumulated several downside surprises, the urgency of additional tightening has reduced, while expectations of rising rates abroad and the supply-shock nature of the activity slowdown limits the appeal of lowering rates.”