During the past few months, the Chilean economy evolved as expected. By the end of 2025, activity expanded at a pace consistent with its potential growth, and February inflation was somewhat below 3%. However, the war in the Middle East has resulted in considerably higher external energy prices and has added a high degree of uncertainty for the outlook of both local and global economies, after a period of greater external boost at the beginning of the year. With the information at hand at the statistical cut-off, in the central scenario inflation will see a significant increase in the second quarter mainly related to the higher international fuel prices. Regarding activity, various factors would influence its evolution: the new international scenario, the fiscal spending adjustment announced by the government in mid-March, and supply-side factors in sectors like agribusinesses and mining. Thus, the GDP growth range forecast for this year is lowered to 1.5%-2.5% (2%-3% in December). The macroeconomic scenario is subject to a higher-than-usual degree of uncertainty. Therefore, the Board estimates that constant assessment of alternative scenarios will be needed where the reactions of the local and world economies may configure inflationary pressures different from those expected and require changes in monetary policy. Thus, the future evolution of the MPR will be analyzed meeting by meeting based on how events unfold. The Board reaffirms that it will make every decision necessary to meet its objective of ensuring that projected inflation stands at 3% over a two-year horizon. In any case, the starting point of the Chilean economy is such that it allows it to better confront complex developments.

The outbreak of the war in the Middel East has caused a major shock on global energy prices and amplified macroeconomic and financial uncertainty. The war has affected the supply of various commodities, including oil, whose price has soared to more than US$100 per barrel. The prices of other products have also gone up, as has been the case with fertilizers, natural gas, and various chemical products, in addition to higher shipping costs (Figures 1 y 2). Given the magnitude of the shock, these hikes will have a significant direct impact on both global and local inflation. However, for the moment it is challenging to anticipate with reasonable certainty the war’s duration, intensity, and effects.

Global financial conditions have deteriorated in this scenario. With respect to late February, global stock markets have shown negative performance, currencies have depreciated against the dollar, and nominal interest rates have risen. The domestic market has mirrored these developments, where worth noting is the depreciation of the Chilean peso, which saw a reversal of its appreciation of the first two months of 2026 (Figure 3).

These events have largely undone the previous improvements that market expectations had recorded for global growth. The United States stood up, where GDP growth in the third and fourth quarters of 2025 exceeded forecasts, revealing a stronger momentum associated to the boom of investments in new technologies (Figure 4). Europe, China, and Latin America also saw better-than-expected expansion rates. As for copper, its price exceeded December projections, but it has recoiled since the war broke out.

At the local level, inflation is at levels slightly below 3%, falling a little faster than was estimated in the last IPoM. Annual total CPI change dropped from 3.4% in November to 2.4% in February, driven significantly by the electricity component after its increase associated with its price unfreezing in January 2025 ceased to affect annual variations. Meanwhile, core inflation (i.e., without volatile items) stood at 3.3% annually, in line with the forecast in December (Figure 5).

GDP ended 2025 with 2.5% growth, similar to the estimate. The performance of non-mining sector drove activity throughout the year, as its expansion was partly sustained by transitory supply factors that implied some greater potential growth in 2025. In this context, these industries’ activity gap is practically closed. As for mining, output has fallen due to lower copper ore and more persistent effects of disruptions in some mines, elements that continue to show up in the activity figures for the first months of the year (Figure 6).

Private consumption remained dynamic, amid the improved performance of several of its fundamentals during previous months. Among these, improved consumer expectations and a sustained increase in real labor income were observed, whose composition is dominated by wage growth as job creation is slow. The unemployment rate showed no significant change.

Gross fixed capital formation (GFCF) continued to grow, boosted by mining and energy projects. By components, machinery & equipment contributed the most to the improvement of investment in 2025, in contrast with lingering construction & other works. At the margin, after the rapid acceleration of previous quarters, GFCF continued to grow, albeit at a slower pace (Figure 7).

Projections

This Report’s central scenario projections are based on particularly uncertain conditions with significant risks. In this context, sensitivity scenario analysis becomes more important than usual.

On the external front, one of the main adjustments of this IPoM falls on the oil price. The central scenario considers a trajectory consistent with the futures contracts averaged over the five days before the statistical cut-off. This means average prices in the order of US$100 per barrel in the second quarter of 2026 and an average of US$86 for the full year, 60% and 40% above December projections, respectively. For 2027 and 2028, higher prices than those estimated in December are foreseen factoring in a greater geopolitical premium (Figure 8). Upward revisions to the prices of other components of energy and foodstuffs are also considered.

In the central scenario, the negative effects of the war on global growth largely offset the improved results observed in the latter part of 2025. Thus, our commercial partners’ GDP growth is projected at 2.7% during this year, close to December IPoM’s 2.6%. For 2027, we maintain projected growth at 2.7%, and at 2.9% for 2028 (Figure 9).

Despite the corrections of the last few days, the copper price has shown a better-than-expected trajectory. This continues to be influenced by the boost of increased demand associated with non-traditional uses such as artificial intelligence, the energy transition, and defense spending. The central scenario assumes higher average prices: US$5.4 in 2026, 5.1 in 2027, and 5.0 in 2028.

Locally, projections incorporate the adjustment to fiscal spending announced by the government in mid-March. With respect to the central scenario of December IPoM, this means a reduction of US$3.8 billion in the terms set forth in the Finance Ministry’s official letter. It is important to note that the central scenario does not include other governmental measures, such as their date of implementation and ultimate content must be defined. This could alter the outlook for the fiscal impulse.

The central scenario lowers the GDP growth range to 1.5%-2.5% (2.0%-3.0% in December). This reflects the impact on the economy of the new international environment, reduced fiscal spending, and a downturn in mining activity —due to the persistence of the factors that drove a drop in output last year. For 2027, GDP growth projection is maintained in the 1.5%-2.5% range, the same forecast anticipated for 2028 (Figure 10). This is consistent with the estimate of the trend growth of the economy.

Prospects for household and business expenditure are slightly revised down. This owes significantly to the deterioration of external conditions, compounded by the drop in fiscal spending. In any case, this is partly offset by the steady growth in income, better expectations, and a bulkier portfolio of investment projects than that of previous years (Figures 11 y 12).

For headline inflation, revisions are concentrated in the short run, associated mainly with the impact of the war on global fuel prices. This triggers a significant increase in inflation, which would be around 4% annually from the second quarter. This scenario takes into account the local fuel price increases announced on Monday, March 23. Inflation is projected to return to 3% by the second quarter of 2027.

Core inflation is also revised upwards in the short term, although by a smaller amount. This increase is justified by the second-round effects of the international fuel price shock. The projection assumes that the propagation of this shock to the rest of the economy will be as usual. In the medium term, these effects are offset by the impact of lower fiscal spending on domestic demand (Figure 13). These projections consider that the real exchange rate (RER) will steadily converge to its long-term levels, with a similar trajectory to the one described in December.

Monetary policy

As already highlighted, the definition of the central scenario is subject to a greater-than-usual degree of uncertainty. Abroad, the war may expand, the damage to energy production may deepen, and/or the transportation of commodities may suffer for longer, resulting in bigger increases in the prices of several raw materials. There may also be monetary or fiscal policy responses that moderate the impacts on financial markets and global activity. At home, we cannot rule out the fiscal impulse or the consumption response being different from the central scenario’s assumptions. All this calls for the need to evaluate alternative scenarios.

Regarding the MPR corridor, the lower bound reflects a scenario where the negative effects on activity are greater than assumed in the central scenario. This would trigger a sharper reduction of medium-term inflationary pressures, prompting the need for a lower MPR over the projection scenario.

The upper part of the corridor sees higher and more persistent inflation than foreseen, which could be the case of the cost shock and/or its propagation exceeds expectations. This could be fueled by a more dynamic domestic demand, driven by a better performance of the global economy, a stronger fiscal impulse or local expectations sustaining private spending decisions. Another possibility would be greater second-round effects reinforcing the mechanisms of inflation persistence (Figure 14).

The Board estimates that constant assessment of alternative scenarios will be needed where the reactions of the local and world economies may configure inflationary pressures different from those expected and require changes in monetary policy. Thus, the future evolution of the MPR will be analyzed meeting by meeting based on how events unfold. However, the starting point of the Chilean economy, with a virtually closed gap, low inflation and inflation expectations close to the target, allows it to better face the challenges of the uncertain scenario and react effectively to the changes that occur in it to ensure the convergence of inflation towards the target.

The Board reaffirms that it will make every decision necessary to meet its objective of ensuring that projected inflation stands at 3% over a two-year horizon.