Chile: Central Bank of Chile leaves rates unchanged in January
Latest bank decision: At its meeting on 28 January, the Central Bank of Chile decided to maintain the monetary policy interest rate at 5.00%. This came after 325 basis points of cuts in 2024.
Monetary policy drivers: The Bank decided to pause its easing cycle due to the recent upticks in headline and core inflation—both were above the Bank’s 2.0–4.0% target range in December—and the depreciation of the peso.
Policy outlook: The Central Bank provided no specific forward guidance on the future direction of interest rates. All our panelists continue to see rate cuts later this year; most expect monetary easing to resume in H1. However, higher-than-anticipated interest rates in the U.S. pose an upside risk.
Panelist insight: On the outlook, Goldman Sachs’ Sergio Armella said:
“We see risks to our forecasted path for monetary policy as skewed to the upside. First and foremost, with one-year ahead (11-month) inflation expectations rising to 3.8% in the latest central bank’s survey of economists, the real ex-ante policy rate sits at 1.2% and is therefore only slightly above the 1.1% neutral estimate of the central bank. Other inflation expectations metrics have risen further (e.g., traders survey and market implied break-even inflation rates). Second, the output gap is only mildly negative, and the central bank noted that activity has surprised to the upside in the fourth quarter. Third, the external backdrop remains challenging.”