- Decision
- Lower
- Rate change
- 25 bps
- monetary policy rate
- 4.5%
The Board of the Central Bank of Chile unanimously cut the monetary policy rate (MPR) by 25 bp to 4.50 % at its 16 December meeting, citing faster-than-expected disinflation and a somewhat brighter domestic and global growth outlook that is reducing risks to the 3 % inflation target, now projected to be reached in the first quarter of 2026. After easing by 25 bp to 4.75 % in July and holding that level in September and October, the Bank has resumed its gradual normalization toward neutral. The statement provides no new operational changes beyond the adjusted policy rate. November headline and core inflation both slowed to 3.4 % y/y, while two-year inflation expectations in the Economic Expectations and Financial Traders surveys remain anchored at 3 %. Non-mining GDP expanded as expected in the third quarter on firm services and investment, though mining output lagged; credit is broadly stable with nascent recovery in commercial loans, and unemployment has edged lower despite subdued job creation. Externally, firmer partner activity, a December Federal Reserve rate cut, rising global equities and copper surpassing USD 5 per pound have improved financial conditions and supported an appreciation of the CLP, though the Board warns that global risks remain elevated. It will assess further MPR moves in line with incoming data and maintains its commitment to securing 3 % inflation over the two-year horizon.
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.