Chile MPC Keeps Policy Rate at 4.5 and Returns to More Cautious Guidance Amid Renewed Uncertainty

Economics Research 28 July 2026 | 7:28PM EDT

Chile: MPC Keeps Policy Rate at 4.5% and Returns to More Cautious Guidance Amid Renewed Uncertainty

Bottom Line: The central bank’s Monetary Policy Committee (MPC) unanimously Sergio Armella | decided to keep its policy rate unchanged at 4.5%. This decision was in line with our Goldman Sachs & Co. LLC forecast, the Bloomberg consensus, and market pricing.

In our assessment, the post-meeting statement strikes a more cautious tone than the one conveyed in the June meeting. Most notable, in our view, was that the MPC dropped the characterization used in the previous meeting in which it had highlighted that the balance of risk for inflation had “been balancing out,” and instead recovered the language used in the two meetings that followed the start of the war in the Middle East, which notes that it would be necessary to evaluate alternative scenarios constantly. The MPC also noted that the macroeconomic backdrop remains subject to a higher-than-usual degree of uncertainty and reiterated that the evolution of the policy rate “will be assessed meeting-by-meeting based on how events unfold.”

On its characterization of domestic developments since the June MPC meeting and IPoM, the Board’s assessment fell on both sides of the balance of risks for inflation but the dovish list was longer. On the upside, the MPC noted that the June headline and core inflation readings were somewhat higher than anticipated. On the downside, Directors pointed to a weaker-than-expected performance of real economic activity in May. They broadened the drivers to include softer investment, in addition to the supply factors linked to natural resources that it had previously flagged. The MPC noted that, although consistent with their projections, high-frequency indicators of consumption suggested softer momentum than at the start of the year. Finally, Directors highlighted the increase in the unemployment rate and the weak pace of job creation.

In our view, the MPC is still inclined to look through the supply-driven oil shock but, amid renewed uncertainty and significant oil price swings, opted to convey a message of added caution, patience, and risk management. All in all, we believe that the soft performance of the economy, together with the weakness in the labor market and an outlook for lower oil prices in the coming months, should keep inflation pressures contained over the relevant two-year monetary policy horizon.

1. The MPC kept its monetary policy rate unchanged at 4.5%. The decision was unanimous and in line with our forecast, the Bloomberg consensus, and market pricing. 2. Directors noted that, in the external backdrop, the volatility associated with the

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conflict in the Middle East remains the focus of attention. The MPC noted the recent swing in oil prices, including lower oil prices ahead of the June meeting, a sharp increase towards US$100 per barrel last week, and a subsequent decline in recent days. 3. Directors also noted that global activity has remained resilient supported by AI-related investments and highlighted that inflation expectations have risen, short and long-term interest rates have increased, and most currencies have depreciated (including CLP). 4. On the domestic front, the MPC noted that real economic activity in May had been weaker than expected in the June IPoM. Directors pointed again to weakness in sectors linked to natural resources as a driver but broadened the list to also include softer-than-expected investment. The MPC, however, remains optimistic about the outlook for investment, pointing to a robust pipeline of projects. The MPC also noted that, although consistent with their projections, high-frequency indicators for consumption suggested a softer momentum than at the start of the year. 5. On inflation, the MPC noted that headline and core inflation had been somewhat higher than expected in June but noted that the passthrough from the oil shock continues to be similar to historical…