Central bankers are choosing to hold steady on interest rates as they navigate a turbulent global economy. Recent indicators show that inflation has plateaued, with prices climbing above the 3% target due to a series of electricity price hikes. However, the Chilean peso has experienced a remarkable recovery, gaining about 10% since hitting a near-record low earlier this year, which has helped ease cost-of-living predictions, despite signs of economic activity strengthening.

Economic Uncertainty and Inflation Risks

Policymakers acknowledged the heightened uncertainty surrounding the global economy in a statement accompanying their decision to maintain current rates. They emphasized that, while the local economy is showing resilience, the inflation landscape remains fraught with challenges. This situation underscores the need for a cautious approach moving forward.

• Local economic dynamics are exceeding expectations
• Gradual recovery in consumer spending and investment is noted

Impact of Global Factors on Chile’s Economy

In February, former US President Donald Trump signed an executive order mandating the Commerce Department to explore potential tariffs on copper, which is Chile’s largest export. This development has not only driven up global copper prices but has also provided a boost to the nation’s currency.

Despite the positive currency movement, Chile’s inflation forecast remains a cause for concern. As of February, consumer prices surged by 4.7% compared to the previous year, prompting traders surveyed by the central bank to predict that inflation will continue to exceed the target over the next two years.

Economic Growth and Future Projections

Chilean economic growth appears to be more robust than anticipated, with the gross domestic product (GDP) increasing by 2.6% last year—surpassing the central bank’s previous estimate of 2.3% from December. Early data for 2025 indicates strong performance in sectors like commerce, suggesting a positive trend in economic activity.

Looking ahead, Chile’s central bank is set to release its updated economic forecasts in the upcoming quarterly monetary policy report on Monday. This will provide further insights into the country’s economic trajectory amid ongoing global challenges.

In summary, while Chile’s economic indicators show signs of recovery, the interplay of global economic factors and domestic inflation will require careful monitoring and strategic decision-making from policymakers.