Chile Interest Rate

The Central Bank of Chile unanimously decided to maintain the policy interest rate at 5% during its January meeting, reflecting persistent external and domestic challenges. Global financial markets remain volatile due to high uncertainty, including the U.S. government transition, with long-term interest rates rising and the dollar strengthening. Domestically, Q4 indicators slightly outperformed December central bank projections, with November’s economic activity growing 0.3% month-on-month, supported by gains in manufacturing and exports. However, weak job creation kept the unemployment rate at 8.5%, and annual wage growth remains elevated. Inflation reached 4.5% in December, with core CPI at 4.3%, driven by peso depreciation, rising labor costs, and electricity tariffs. Two-year inflation expectations remain anchored at 3%, but rising risks have led the Bank to reaffirm its cautious, flexible approach to ensure convergence within two years.