Background on Chile’s Central Bank and Its Role
The Banco Central de Chile (BC) is the country’s central banking authority, responsible for managing monetary policy to maintain price stability and support economic growth. Its decisions on interest rates significantly impact Chile’s economy, influencing borrowing costs for consumers and businesses.
Central Bank’s Decision to Maintain Interest Rate
The Banco Central de Chile decided to keep the policy interest rate at 4.75%. This decision was made unanimously following a previous 0.25% reduction in the rate during the last policy meeting.
Reasons Behind the Decision
The central bank cited ongoing global uncertainties as the primary reason for maintaining the interest rate. Specifically, they highlighted tariffs imposed by the United States on its trading partners, including Chile.
Inflation Outlook in Chile
Domestically, the central bank assessed that underlying inflation (excluding highly volatile items) is expected to exceed previous estimates over the next twelve months.
Recent Inflation Trends in Chile
The interannual inflation rate in Chile reached 4% in August, according to the National Statistics Institute (INE), with no change in the consumer price index (CPI) for that month.
Chile concluded 2024 with an inflation rate of 4.5 percent.
For 2025, the Banco Central projects that the CPI will close around 3.7 percent, which is above its target of 3 percent.
Key Questions and Answers
- What is the current interest rate decided by Chile’s central bank? The Banco Central de Chile maintained the policy interest rate at 4.75%.
- Why did the central bank choose to keep the rate unchanged? The decision was based on global uncertainties, particularly US tariffs on trading partners, and the expectation of higher underlying inflation in Chile.
- What is the recent inflation rate in Chile? The interannual inflation rate was 4% in August, with no change in the CPI for that month. Chile ended 2024 with a 4.5 percent inflation rate.
- What is the projected inflation for 2025 according to the Banco Central? The central bank estimates that the CPI will close around 3.7 percent in 2025, which is above its target of 3 percent.
