Headline inflation fell faster than projected in September, in a global and local economic environment that was somewhat better than expected. In the central scenario of this Monetary Policy Report (IPoM), inflation would reach the 3% target in the first quarter of 2026. This considers a more favorable performance from some cost factors, in a context where risks to inflation convergence have diminished. Overall, local activity has been in line with expectations, with more dynamic investment in machinery and equipment. Internationally, the external boost is somewhat stronger for Chile. Global activity has been resilient to the uncertainty shocks at the beginning of the year, and financial conditions have improved. The rise in the price of copper has positively impacted the terms of trade. Nevertheless, global risks remain significant. The Board will evaluate the future movements of the Monetary Policy Rate (MPR) by considering the evolution of the macroeconomic scenario and its implications for the convergence of inflation.

Inflation has declined since September IPoM and is headed to reach its 3% target in the next few months. In November, the year-on-year change in total and core CPI was 3.4%, compared to values close to 4.0% in August (figure 1). Inflation expectations at shorter horizons have also declined, while two years ahead they remain aligned with the target.

Cumulative inflation over the last four months was lower than forecast in the last IPoM, influenced by the more favorable performance of some cost factors (figure 2). The difference was concentrated in goods components, influenced by the appreciation of the peso —more than 4% since the previous IPoM— and the effect that trade diversions would have had on the prices of some imported goods. The atypical behavior of certain food prices also contributed. All of this has taken place in a context where the monthly volatility of goods inflation has shown a significant increase in recent years. Services components showed no big differences. Labor costs growth has slowed down, although in nominal terms it remains above its historic averages.

Overall, activity has been in line with expectations, with investment being more Dynamic (figure 3). In the third quarter, non-mining GDP growth was in line with forecasts. Seasonally adjusted, activity in these sectors increased 0.4% quarter-on-quarter (q/q) (+2.6% year-on-year, original series), with services and, to a lesser extent, wholesale and retail trade showing the strongest performance. Meanwhile, total GDP growth contracted 0.1% q/q in the third quarter (+1.6% year-on-year, original series). This result was lower than expected due to the performance of the mining sector, which was affected by a decline in production at some sites and lower ore grades.

As for expenditure, the performance of Gross Fixed Capital Formation (GFCF) stands out, especially in machinery and equipment. In the third quarter, this component grew above expectations once again, and capital goods import figures for October and November confirm that this momentum has been maintained. Mining and energy projects continue to be the main drivers of growth in the machinery and equipment component. Investment in construction and other works is still lagging.

Private consumption has evolved in line with expectations, with improvements in some of its fundamentals. As projected, its quarterly growth pace moderated compared to previous quarters (figure 4). Regarding its fundamentals, consumer expectations have increased. The labor market shows improvement, although significant challenges remain. The unemployment rate has fallen since September’s IPoM but remains above historical averages. Job creation is still sluggish.

On the external front, the world economy has been more resilient than previously estimated (figure 5). In the third quarter, activity growth in the United States is estimated to have exceeded expectations, although the labor market continues to weaken. The Eurozone also saw positive surprises in activity, partly associated with higher defense spending in several countries. Latin America performed well, while Chinese figures remained in line with the growth objective set by its authorities.

The boom of new technologies and expectations about their impact on productivity have spurred global performance, with noticeable impacts on the real and financial sectors, mainly in the United States. Related investments have become an important driver of the American economy, contributing over a third of its annual GDP growth in the second quarter of 2025. Stock market gains in the United States have been led by AI-related shares (figure 6).

The terms of trade have improved in the past few months. Supply problems combined with increased demand associated with AI investment, energy transition, and defense spending have pushed nominal copper prices, exceeding US$5 per pound (LME). Oil prices have fallen amid improved supply prospects, although refined product prices such as gasoline have not fallen as much as anticipated due to specific distortions in certain markets (figure 7).

In this context, compared to September, there have been widespread increases in stock markets and mixed movements in interest rates. The Federal Reserve again lowered its benchmark interest rate and is expected to make further cuts throughout 2026. The appreciation of several Latin American currencies stands out, including the Chilean peso (figure 8).

Accordingly, the external boost from abroad to the Chilean economy is a little stronger, with a slight increase in trading partners’ growth and an improvement in the terms of trade. The former is revised from 2.6% to 2.8% on average for the 2025-2026 period. In the terms of trade, the copper price is revised upward across the projection horizon, combined with a limited reduction in oil price estimates (figure 9).

In any case, the risks surrounding the evolution of international conditions remain high. There are a number of ongoing geopolitical tensions, although some have eased. Military tensions persist and developed economies —particularly in Europe— are stepping up their defense spending, which could further compromise their fiscal situation. Added to this are doubts regarding the valuation of global asset prices.

Projections 

The central scenario is somewhat more favorable than in the previous IPoM. GDP is projected to grow by 2.4% in 2025, that is, in the middle zone of the September estimated range (2.25%-2,75%). For 2026, the estimated growth range is revised up to 2.0%-3,0% (1.75%-2.75% in September). As for 2027, GDP growth is still forecast to stand between 1.5% and 2.5%, in line with the trend growth of the economy. Growth projections have been steadily raised over the course of 2025 —particularly for non-mining sectors—, as the global scenario has been resilient and local investment has been more dynamic than anticipated, especially in the mining and energy industries (figure 10).

The outlook for investment is improved again, driven by a more favorable evolution of its fundamentals. The projected average copper price rises to US$4.7 in 2026 —which determines the lower current account deficit expected for that year— and to US$4.6 in 2027 (US$4.3 previously for both years). In addition, financial conditions and business expectations have improved compared to previous years. Furthermore, the investment boost is expected to spread across all sectors during the projection horizon. Thus, GFCF growth estimates are revised up for this and next year, to 7% and 4.9%, respectively (5.5% and 4.3% in September). Growth estimate for 2027 remains at 3.1% (figure 11).

Forecasts for private consumption see limited adjustments. It is expected to further approach expansion rates consistent with trend GDP. Its annual growth will be close to 2.5% in 2025 and 2026, and 2% in 2027, supported by the sustained increase in consumer confidence and the wage Bill (figure 12).

The central scenario assumes that fiscal spending in 2026 will grow in line with the Budget Law. The 2027 forecast incorporates the committed expenses described in the Public Finances Report for the third quarter of 2025.

Total inflation is projected to be close to 3% in the first quarter of 2026 —toward the middle of the year in the case of the CPI without volatile items—and to remain in the vicinity for the remainder of the monetary policy horizon (figure 13). Among many factors, this considers an appreciation of the real exchange rate, with starts from a lower level due to its recent evolution, consistent with its fundamentals. It also includes a reduction in electricity rates in early 2026, as reported by the authority. These elements are offset by moderate inflationary pressures on the demand side, given that the increased investment is concentrated in the tradable component and some indicators suggest an increase in productivity.

Monetary policy

Inflation has declined faster than was forecast in September, under local and global conditions somewhat better than expected. In the central scenario of this IPoM, inflation is foreseen to reach its 3% target during the first quarter of 2026. This assumption factors in the more favorable performance of some cost factors, in a context of reduced risks facing the convergence of inflation.

The Board will evaluate the future movements of the MPR by considering the evolution of the macroeconomic scenario and its implications for the convergence of inflation. At the same time, it reaffirms its commitment to conduct monetary policy with flexibility, ensuring that projected inflation stands at 3% over the two-year horizon.

The Board revised the range of estimated values for the neutral MPR to 3.75-4.75% in nominal terms. For the purposes of the projection scenarios, the midpoint of this range, 4.25%, is used as the methodological assumption.

The borders of the MPR corridor are defined by sensitivity scenarios similar to those proposed in September. The upper bound is associated with more dynamic domestic demand. A stronger impulse from the local economy might encourage expectations and spending of households and firms, in a context of eased financial conditions, labor costs growing above historic averages and a higher copper price, all of which would result in stronger inflationary pressures.

The lower bound represents a scenario of deteriorating global financial conditions that negatively affect the local economy. This could be the case in the event of a correction in the asset prices of tech companies, which would affect external financing conditions, global activity, and commodity prices, especially copper. Under these conditions, domestic demand would weaken, thus reducing inflationary pressures.

The Board estimates that the risk of a sudden reversal of global financial conditions is still significant. Such situations could be triggered by varied factors. For example, a decline in optimism about the impact of technological breakthroughs on business productivity could reduce risk appetite. It could also occur in the event of less favorable news about current geopolitical tensions. For example, an escalation of the trade war or armed conflicts, as well as a sharper deterioration in the fiscal or institutional situation in the major economies. These aspects need to be closely monitored, as was noted in our latest Financial Stability Report (IEF).