FX.co ★ Chile Holds Interest Rates at 4.5%, As Expected

The Central Bank of Chile decided to keep its policy rate steady at 4.5% during its January meeting, a decision reached unanimously. The bank attributed this move to an increasingly favorable external environment and ongoing advances in reducing inflation. The board noted improved global conditions, emphasizing stronger-than-expected US economic activity and higher copper prices compared to levels at their previous meeting. Nevertheless, they cautioned that geopolitical fiscal and financial risks remain. Domestically, economic activity and demand have generally aligned with projections from the September Monetary Policy Report (IPoM), with short-term consumption and investment indicators meeting expectations. However, both total economic activity (Imacec) and non-mining activity saw a month-on-month contraction of 0.6% and 0.5%, respectively, in November. The labor market displayed minimal changes, with unemployment rates stable and job creation remaining subdued. Inflation showed signs of easing towards the central bank's target, with headline inflation reported at 3.5% year-on-year and core inflation at 3.3% in December. Furthermore, two-year inflation expectations stayed anchored at 3%, in line with the target convergence over the policy horizon.