Central Bank of Chile leaves rates unchanged in October

Bank decision matches market expectations: At its meeting on 28 October, the board of the Central Bank of Chile decided to maintain its policy rate at 4.75%—the lowest since January 2022—for a second consecutive meeting. The decision was unanimous and in line with market expectations.

Caution in the face of political uncertainty and inflation risks: Domestically, inflation and economic activity evolved in line with the Central Bank’s expectations through September; thus, the Bank deemed it unnecessary to change interest rates for the time being. Meanwhile, inflation risks further prodded the Bank to remain cautious, including price drivers such as rising labor costs and stronger private consumption amid an easing in the unemployment rate since June; upcoming November elections and lingering global trade frictions further supported the Bank’s wait-and-see stance.

Monetary policy easing should resume ahead: The Central Bank indicated that it requires additional data on inflation before reducing interest rates further, with price growth still above its 3.0% medium-run target. The vast majority of our panelists expect a rate cut of 25 basis points at the Bank’s last meeting of 2025 on 16 December as inflation converges to target, whereas the rest expect a cut in Q1 2026 amid lingering upside risks to inflation.

Panelist insight: Itaú Unibanco analysts commented on the outlook: “The Board sees no urgency to cut rates, preferring to gather more data […]. The December meeting will be more data-rich, with three additional CPI prints since [...the Central Bank last made forecasts in September], and takes place two days after the expected presidential runoff. Softer inflation dynamics, particularly on the services front, along with a CLP [Chilean peso] recovery, dovish Fed outlook, and reduced electricity price pressures ahead may open the door to resuming the easing process, but risks tilt to postponing the resumption to early 2026.”

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