The Central Bank of Chile has lowered its 2026 gross domestic product growth forecast to a range of 0.25% to 0.75%, from 1% to 1.75% in its June Monetary Policy Report. The revision reflects weaker domestic spending, lower mining production and adverse weather, alongside declining confidence and labor market deterioration. Headline inflation is still projected to remain slightly above 4% at the end of 2026 before converging to the 3% target in the second quarter of 2027. Consumption is now expected to grow 1.7% in 2026, while gross fixed capital formation is forecast to contract 0.3%, compared with previous projections of 2.2% for both. Unemployment has risen to 9.5%, with weak demand weighing particularly on labor intensive sectors such as construction. Growth is projected to recover to 2% to 3% in 2027 and 2.25% to 3.25% in 2028, supported by the Reconstruction Law, which is expected to add about 0.5 percentage points to annual growth in each of those years through higher investment. The bank’s board kept the monetary policy rate at 4.5% and will assess its path meeting by meeting. It highlighted heightened uncertainty from the Middle East conflict and the risk that domestic economic weakness could persist longer than projected.
2026-09-09Central Bank of Chile
Central Bank of Chile cuts 2026 growth forecast to 0.25% to 0.75% and holds policy rate at 4.5%
The Central Bank of Chile cut its 2026 growth forecast to 0.25% to 0.75% as domestic demand, mining output and the labor market weakened. It still expects inflation to converge to 3% in the second quarter of 2027 and projects a growth rebound from 2027, supported by reconstruction investment. The policy rate remains at 4.5%.