MercoPress. South Atlantic News Agency

Chile's Central Bank keeps basic interest rate at 5%

“The escalation of the war conflict in the Middle East adds further uncertainty to this outlook,” Chile's Central Bank reckoned

Chile's Central Bank decided Tuesday to maintain the monetary policy interest rate at 5%, unchanged since December 2024, due to global economic uncertainties, particularly from escalating trade tensions and the Iran-Israel conflict in the Middle East, which pose risks to the US and global economies.

The unanimous call by the Bank's Monetary Policy Committee follows results in Q1 2025 above expectations, driven by export sectors, with rising consumption and anticipated investment growth.

However, the labor market shows slow job creation and rising unemployment, despite high wage growth. Inflation has declined, with total and core CPI at 4.4% and 3.6% in May, aligning with projections, and two-year inflation expectations remain at 3%.

The local financial market mirrors emerging market trends, with stable exchange rates, long-term rates, and gains in the IPSA, while credit remains unchanged.

The Central Bank will maintain flexibility in its policy to ensure inflation converges to 3% over two years, with future rate adjustments depending on macroeconomic developments.

The last time Chile's Central Bank cut the rate was in December 2024, when it was lowered from 5.25% in November to 5% in December, remaining at this level so far in 2025.

“As for inflation, although data in the United States have surprised on the downside in recent records, the expected effects of the trade conflict imply elevated risks. The escalation of the war conflict in the Middle East adds further uncertainty to this outlook. Its scope, development, and potential impacts on the world and local economy are unknown, so it is a factor to be monitored”, the Central Bank highlighted in its report.