- Decision
- Lower
- Rate change
- 25 bps
- monetary policy rate
- 4.75%
The Board of the Central Bank of Chile unanimously cut the monetary policy rate by 25 bp to 4.75 % at its July meeting, citing headline inflation’s fall to 4.1 % y/y in June—below the June Monetary Policy Report (IPoM) forecast—alongside contained core inflation at 3.8 % and two-year inflation expectations anchored at the 3 % target, while domestic activity is evolving broadly as projected and external trade tensions continue to cloud the outlook. After holding the policy rate at 5 % since at least January, this marks the first reduction in 2025. Short- and long-term local yields have moved little since the previous meeting, the peso has depreciated and bank credit remains subdued, though mortgage demand shows some pickup. Non-mining economic activity grew 2.4 % y/y in May amid soft job creation and rising unemployment, even as private consumption and investment gain support from large projects and real wages stay buoyant. Internationally, lingering geopolitical strains and fresh US tariff measures—especially on Brazil and copper—have kept global uncertainty elevated, although financial-market reactions have been muted; copper prices were steady on the London Metal Exchange, Comex prices rose and oil declined after the Iran-Israel ceasefire. The Board reaffirms that, if the June IPoM baseline materialises, the policy rate will move toward its neutral range in coming quarters and it will adjust future moves as needed to ensure inflation converges to 3 % within two years.
Rate evolution
From June 2025 to September 2026, the Central Bank of Chile lowered the policy rate by 50 basis points from 5.0% to 4.5%, with a July cut, holds through October, a further reduction in December and then no change through September 2026. The initial easing reflected declining headline and core inflation, inflation expectations anchored at 3% and a view that earlier upside inflation risks had moderated despite firmer-than-expected activity and domestic demand, slow job creation, strong wage growth and persistent external uncertainty, while the September-October pause came as core inflation proved higher and more persistent than expected.
Since December, when faster-than-expected disinflation and reduced convergence risks justified another cut, the Board has kept the rate at 4.5%, initially citing lower near-term inflation and later stressing that the conflict in the Middle East, higher oil prices and CLP depreciation were lifting short-term inflation and uncertainty. On 28 July 2026, it held the rate as renewed attacks following the June ceasefire pushed oil prices back to around USD 100 per barrel before a moderation, while activity and investment were weaker than projected, unemployment rose, June headline inflation reached 4.3% and core inflation 3.4%, and two-year inflation expectations remained at 3%.
On 8 September 2026, the Board unanimously held the rate at 4.5% as renewed escalation between the United States and Iran brought oil prices close to USD 100 per barrel, while the domestic economy remained weak through the second quarter and early third quarter, domestic demand slowed, jobs declined and unemployment increased. Annual headline inflation rose to 4.1% in August, driven by volatile components, while core inflation stood at 3.3% and two-year expectations remained at 3%, leading the Board to retain a meeting-by-meeting approach amid heightened external risks and the possibility that domestic weakness could persist.