With Rosanna Costa at the helm, officials are anticipated to keep borrowing costs at 4.5%, with the call coming after Tuesday's market close, according to every analyst polled by Bloomberg. Pricing in swaps points to no move now and the first hikes penciled in roughly a year from now.
Market gauges imply the policy rate stays near 4.5% over the next six months. Separately, respondents to the central bank's September survey foresee the benchmark staying put for two years, but that stance could reverse quickly should the Federal Reserve adopt a more aggressive tightening posture.
Local data are slumping. Economic activity posted its sharpest monthly fall in four years in July, down 1.7% after a rough first half, raising the odds of another quarterly contraction. Unemployment has climbed to levels last seen during the lockdown period.
Forecasts are fading too. Analysts from Goldman Sachs & Co. LLC. and JPMorgan Chase & Co see the nation's GDP expanding by under 1% this year, and Scotiabank estimates growth could be just 0.3% following the soft July reading. Goldman Sachs economist Sergio Armella said policymakers are likely to prioritize the soft domestic backdrop over a more hawkish tone abroad, and he cut his 2026 GDP call for Chile to 0.6% from 0.8%, flagging downside risks.
From the demand side, in August central bank board member Kevin Cowan noted that second-quarter household consumption and investment decelerated more than anticipated, with some areas of private spending still weakening.
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Price pressures are not gone. Fresh figures Tuesday showed consumer prices rose 0.6% in August, pushing the 12-month rate to 4.1%. In the central bank's latest monthly survey, traders look for another 0.6% increase in September. Inflation expectations are edging higher: over the past month, the one-year breakeven climbed about 40 basis points to 3.49%, the highest since May, and the two-year gauge increased by nearly 20 basis points to 3.29%.
Energy is the wild card. With the US-Iran war dragging on and recent tit-for-tat strikes keeping the conflict simmering, oil's swings are feeding through to Chile, a country that brings in almost all of its fuel. In March, as crude spiked, Kast relaxed Chile's fuel stabilization system - MEPCO - which resulted in the biggest increase in gasoline prices since at least 1980.
Prices eased during a lull in fighting, but they are rising again. LarrainVial economists say a rebound in business confidence will depend not just on President José Antonio Kast's pro-market push, but also on oil moving closer to pre-war levels and visible progress on cutting red tape.
Global policy is a swing factor too. He added that a Fed hike would strengthen the US dollar broadly, and the Chilean peso could weaken even more if local growth leaves no room to lift rates. Delivering his first address after taking over as Federal Reserve chairman, Kevin Warsh said the 2% inflation goal is "firm and fixed," remarks delivered Aug. 28 at Jackson Hole that sent Treasury yields higher as markets positioned for a possible Fed increase. As Banco Itau's chief Latin America economist Andrés Pérez put it, "We haven't seen a broader pass-through or second round effects of higher oil prices, but propagation risks have increased," so policy decisions should remain cautious.
Chile looks a step away from recession at the same time inflation risks are re-emerging. That is why markets expect the policy rate to sit near 4.5% for months, with the central bank threading a narrow path between supporting growth and keeping a lid on prices. Congress did pass corporate tax cuts and investment guarantees in July, but analysts doubt those measures will deliver a quick or large boost.
For everyday investors, the hinge points are clear: oil and the Fed. A fresh upswing in energy or a surprise from Washington could change the interest rate outlook fast and ripple through currencies and inflation. Until then, a hold at 4.5% would be less a grand statement and more a pragmatic pause while the data sort themselves out.
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