One of the objectives that the Organic Constitutional Law stipulates for the Central Bank is "to safeguard the stability of the currency." In practice, this means that the Bank must prevent the value of the currency from deteriorating due to inflation. Thus, it is understood as a price stability objective. All the actions combined that the Central Bank adopts to meet this objective are known as Monetary Policy.

The MPR is the main operational instrument of monetary policy. In practice, it is the interest rate at which the Central Bank lends to commercial banks, but it also affects all rates in the financial system. The MPR is determined by the Central Bank's Board at the monetary policy meetings, which are held eight times a year. There the Board decides on a level for the MPR and communicates the trajectory that will achieve compliance with the inflation target.

The Central Bank conducts its monetary policy by influencing the interest rate at which banks lend to each other from one day to the next (known as the overnight interbank interest rate). This rate is determined by the equilibrium between supply of and demand for funds. In practice, the Central Bank controls the supply of liquidity —or monetary base, which corresponds to the banknotes and coins issued by the Central Bank and the deposits held by commercial banks at the Central Bank— so that the resulting interbank rate is close to the monetary policy rate (MPR). Thus, the MPR corresponds to the target interbank rate that the Central Bank seeks to achieve.

In practice, a change in the monetary policy rate modifies the cost of borrowing for commercial banks and, through them, for individuals and companies. This leads to changes in consumption and investment decisions, which in turn affect economic activity and inflation.

The two-year horizon accommodates the lags between changes in the monetary policy rate (MPR) and their effects on activity and prices. At the same time, it reduces the volatility of output, limiting the effects of transitory inflation variations.

Unconventional measures are a set of special instruments used by the Central Bank to achieve its objectives. They have been used in periods such as the Global Financial Crisis or, since the end of 2019, to address the impact of internal and external shocks to which our economy has been exposed. In the first episode, the use of Term Liquidity Facilities (FLAP) stood out as a way of committing to keep the MPR at its lower limit for an extended period of time. In the second one, the Central Bank introduced a set of measures, including the three stages of the Financing Facility Conditional on Increased Lending (FCIC), liquidity measures in pesos and dollars, and foreign exchange interventions.

The highest authority of the Central Bank of Chile is its Board, which governs and administers it and makes decisions on conventional and non-conventional monetary policy. Likewise, the Board adopts other financial and forex regulation decisions.
All these decisions are aimed at achieving the Bank's objectives: to ensure price stability and the normal functioning of internal and external payments.
The Board is made up of five members, appointed by the President of the Republic, upon prior approval by the Senate. Each member serves for ten years. At the same time, one of them serves as the Governor for a term of five years.

The Monetary Policy Meeting (MPM) is the decision-making instance in which the Board of the Central Bank of Chile decides on changes to the Monetary Policy Rate (MPR). In 2018, the number of annual meetings was reduced to eight (from 12 previously). Bank managers and analysts also participate in the MPM,  along with a representative of the Ministry of Finance, all of them without voting rights.
Four of these meetings are held on the business day prior to the publication of the Monetary Policy Report and they take place on one day. On the other four occasions, the meeting lasts one and a half days.
Each September, the calendar for the next year's meetings is announced, together with the dates of publication of the year's Monetary Policy Reports.

In accordance with its policy of institutional transparency, the Bank makes the transcripts of past monetary policy sessions available to the public after ten years have elapsed since the date of each such session and on the basis of an annual disclosure criterion, in March of each year.
The content of the published transcripts is fully disclosed, except for those passages or elements that must remain secret or reserved pursuant to the provisions of articles 65 bis and 66 of the Constitutional Organic Law governing the Central Bank, in connection with the relevant provisions of Law No. 20,285 on Access to Public Information.

- View historical MP Meeting documentation
 

The Monetary Policy Report is an official document of the Central Bank's Board whose main purposes are: (i) To inform and explain to the Senate, the Government, and the general public its view on the recent and expected evolution of inflation and its implications for the conduct of monetary policy; (ii) To publicly expose the medium-term framework of analysis used by the Board in formulating monetary policy; and (iii) To provide useful information for the formulation of economic agents' expectations about the future path of inflation and output. The MP Report also responds to an obligation set forth in the Constitutional Organic Law of the Central Bank to inform the Senate and the Minister of Finance (Art. 80).

Chapter I of the MP Report analyzes the main factors that explain the recent evolution of the macroeconomic scenario at the national and international levels. These include the external environment, financial conditions, aggregate demand and activity, and recent price and cost developments.

In addition, a section (Chapter II) presents the considerations behind the monetary policy strategy for the coming quarters and describes how the monetary policy reaction to certain revisions to the central scenario could change. These scenarios are the so-called sensitivity scenarios, which imply situations where the economy would behave within the ranges forecast in the growth projection, but the achievement of the inflation target would require a different monetary policy path. The MP Report also discusses more extreme scenarios, the so-called risk scenarios. In these, the economy would drift out of the growth range and monetary policy would undoubtedly be different

The MP Report is published four times a year. It is released first thing in the morning of the working day following the Monetary Policy Meeting (MPM) in March, June, September, and December, containing relevant information explaining the monetary policy decision adopted.

The MP Report is prepared mainly by the Monetary Policy Division (MPD), with the support of other divisions. The MPD has four departments: the International Analysis Department builds the Report's baseline scenario for the international economy, making short and medium-term projections and alternative scenarios. The Macroeconomic Analysis Department advises on the preparation of the Report by preparing the baseline scenario, together with the sensitivity and risk scenarios for the national economy. The Economic Studies Department advises on the research of economic matters of conjunctural relevance, which can be published in the boxes contained in the MP Report. Finally, the Monetary Policy Strategy and Communication Department responsibility is to reflect the Board's vision and the analysis of the rest of the departments in the drafting of the Report. In total, around 40 professionals work directly in the production of the MP Report, but there are many more considering those who contribute in a more indirect way, from those in charge of obtaining raw data to workers from other divisions who support the analysis of specific topics.

The MP Report is aimed at the specialized public (market players and analysts), the general public and public entities such as the Senate and the Government. For this reason, the publication of the MP Report is complemented by a set of information aimed at different audiences, with the objective of improving their understanding of the Board's decisions and the future orientation of monetary policy. Thus, for the specialist audience, the Report is complemented with minutes on internally conducted research, files that gather historical information on projections and technical presentations by the Board and Bank staff members. For the general public, the MP Report is complemented with infographics that summarize the contents of the Report in a more user-friendly way, presentations that cover the main topics included in the Report, with questions and answers to address the main topics in the MP Report, and a video that presents the Report's information in simplified form. In addition, the Board and staff members make presentations so that all audiences can access these contents from the original source.