Heteronomics Archive

December 17, 2024

Chile: 25bp Rate Cut To 5.0% (Consensus 5.0%) in Dec-24

The Central Bank of Chile reduced its policy rate by 25 basis points to 5%, meeting market expectations and maintaining a gradual approach to monetary easing amid weak domestic demand and rising external uncertainties.
Global factors, including US economic resilience, higher long-term interest rates, and China's continued weakness, have strengthened the US dollar and pressured copper and oil prices, influencing Chile's trade and inflation dynamics.
Domestic challenges, such as weak private consumption, limited job creation, and peso depreciation, could shape the pace of future rate cuts, with the central bank remaining data-dependent and focused on achieving its 3% inflation target over the medium term.

October 18, 2024

The Central Bank of Chile reduced the policy rate by 25 basis points to 5.25%, in line with market expectations, reflecting a cautious approach to inflation management amid global volatility.
External factors, including the Federal Reserve’s rate cuts and China’s stimulus measures, have contributed to higher long-term interest rates and a stronger US dollar, exerting downward pressure on the Chilean peso.
Future rate cuts are likely, but their pace will depend on domestic inflation trends, global economic developments, and the central bank’s assessment of financial stability risks.

September 03, 2024

The Central Bank of Chile cut the MPR by 25 basis points to 5.5% in response to slowing economic activity and inflation dynamics, aligning with market expectations again after surprisingly holding the rate steady in July.
Chile’s financial market mirrored global trends, with falling short- and long-term interest rates and a modest appreciation of the peso. However, credit growth remains weak, especially in the commercial sector.
Future MPR cuts will likely proceed faster than previously projected, contingent on macroeconomic conditions and inflationary pressures, with the Bank committed to ensuring inflation remains on track to reach 3% over the two-year horizon.

July 31, 2024

The Central Bank of Chile kept the MPR unchanged at 5.75%, defying expectations of a 25 basis point cut due to a cautious assessment of global inflation trends and mixed signals from major economies like the US and China.
Domestically, financial markets mirrored global trends with lower indexed rates, a depreciated peso, and weak credit conditions. Economic activity underperformed relative to projections, and investment expectations showed signs of improvement.
The Board anticipates further MPR reductions contingent on macroeconomic developments, with a commitment to maintaining policy flexibility to ensure inflation remains aligned with the 3% target over a two-year horizon.