Chile: Central Bank of Chile decreases rates in October
Latest bank decision: At its meeting on 17 October, the Central Bank of Chile decided to lower the monetary policy interest rate by 25 basis points to 5.25%, in line with market expectations. This takes total monetary easing since mid-2023 to 600 basis points.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision were weak bank lending, rising unemployment, lower-than-expected inflation in September, and market inflation expectations anchored at the midpoint of the Bank’s 2.0–4.0% target range.
Policy outlook: The Central Bank of Chile indicated that the monetary policy interest rate will see further reductions going forward, without providing specific forward guidance on the exact pace of future changes. Most of our panelists expect another rate cut at the final meeting of the year in December, before further monetary easing in 2025. The policy rate is seen stabilizing at close to 4% in the medium term.
Panelist insight: Itaú Unibanco analysts commented on the outlook:
“The central bank will continue to cut rates and gradually reach 4% in June next year. Overall, inflation risks stem from transitory supply factors: an electricity price adjustment; potential oil price spike if the Middle East conflict escalates further; a market risk-off move amid US elections and geopolitical events that may weaken emerging market currencies.”