What policymakers are expected to do
With Rosanna Costa chairing the board, all Bloomberg-surveyed analysts expect the central bank to leave borrowing costs at 4.5% on Tuesday, extending the pause to seven meetings. Even so, the curve has crept hawkish.
The snag is sticky prices. Headline CPI was up 4.1% in September versus a year earlier, and two-year inflation expectations have climbed above the 3% target. That complicates the bank's projection that inflation will be back at target in the second quarter of 2027.
Why inflation pressure is building
Several forces are fanning price pressures at once. The prolonged Middle East conflict has lifted fuel costs, the peso has slid to an 18-month low, and global rates remain high. Chile's state refiner Enap just posted a fifth consecutive fuel increase, raising diesel about 6.7% on Thursday, with 93- and 97-octane gasoline up 2.9% and 2.8%.
According to Finance Minister Jorge Quiroz last week, the government continues to spend about $80 million each week to buffer fuel costs, yet he cautioned that further adjustments will be required if global pressures endure. Brent crude has remained above $100 since September and is close to the highest level since late April, after surging more than 90% this year as the Iran war disrupted Persian Gulf flows.
Banco de Credito e Inversiones' head of market making, Alexis Vega, said, "The shock is no longer temporary, and those higher costs are very likely to start spilling over into other sectors of the economy." "The danger is that those effects begin to unanchor inflation expectations."
What markets and forecasters see next
UF forwards, which reflect inflation-indexed pricing, suggest CPI could crest at 5.4% in February, slip below 4% in April, and then cool more gradually. A central bank poll released on Oct. 22 indicates traders see annual inflation at 3.2% in 24 months.
"The risks to the policy-rate path are now tilted more toward potential hikes than an extended hold," said Samuel Carrasco, Credicorp Capital's chief economist for Chile. "We expect policymakers to adopt a more hawkish tone in the statement, opening the door to possible rate hikes in December or during the first quarter of 2027."
Markets move on subtle signals, and smarter tools can help you see them. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.
Scotiabank economists led by Jorge Selaive warn that a weaker peso could pass through to core prices. They also point to government spending now projected to rise 1.5% in 2027, an amount they argue is more than double the pace the central bank assumed in its September report. Their call: "a shift in the tone of monetary policy on Oct. 27 and a 25-basis-point rate hike at the Dec. 15 meeting, with a possible additional 25-basis-point increase at the January 2027 monetary policy meeting."
Globally, investors are watching the Federal Reserve, expected to keep rates unchanged on Wednesday before adding 25 basis points in December. "We expect the central bank to remain on hold at this meeting and possibly at the next one in December," Vega said. "But if inflation expectations materialize and the Fed continues raising rates, the possibility would begin to emerge that the Chilean central bank's next move would be a hike."
Growth clouds and the investor takeaway
A weak domestic backdrop takes some steam out of inflation. Recent activity has been weighed down by elevated joblessness, harsh weather, interruptions to mining, and weak investment. Quiroz said copper production may decline by 8% to 9% this year, subtracting about 1 percentage point from GDP directly and another half-point via spillovers. In the central bank's October survey, analysts anticipate GDP will rise a mere 0.2% this year, then improve to 3% in 2027.
An investment rebound is expected next year, helped by a newly approved economic omnibus bill with a series of tax cuts. Quiroz also flagged a "large injection" of public-sector activity in late 2026 and the first half of 2027 for construction, public works, housing and municipalities.
The bottom line: a fuel shock, a soft currency and firm global rates are nudging Chile closer to tightening, even as growth stays fragile. That mix can lift front-end yields and keep the peso choppy, with timing chatter centered on December 15 and early 2027.
Keeping a steady perspective is easier when you use better analysis tools. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.
