16.12.202521:16:36UTC+00Chile Cuts Interest Rates By 25 bps, As Expected

The Central Bank of Chile decided unanimously in December to lower its policy rate by 25 basis points, bringing it down to 4.5%. This decision reflects an improved external environment and a quicker than expected reduction in inflation. The board highlighted better global conditions, buoyed by the US Federal Reserve's rate cut in December and the anticipation of further easing in the coming year. Additionally, equity markets have strengthened and copper prices have exceeded $5 per pound. Domestically, economic activity and demand have broadly aligned with the September Inflation Report (IPoM). Non-mining GDP has met forecasts, and investment, particularly in machinery and equipment, has shown signs of strengthening. However, overall growth has been hindered by a sluggish mining sector. The labor market has seen improvements, with a recent decline in the unemployment rate, although job creation is still limited. Inflation has decreased more rapidly than expected, with both headline and core inflation recorded at 3.4% year-on-year in November. Two-year inflation expectations remain close to 3%, suggesting that inflation will reach its target by the first quarter of 2026.