Monetary Policy Report
Monetary Policy Report (IPoM)
Monetary Policy Report March 2025
Inflation has evolved in line with projections in the December IPoM, although it has remained at high levels and with important risks regarding its future evolution. Activity has been more dynamic than expected, largely due to the boost from exports. Meanwhile, the international outlook has become significantly more uncertain due to the resurgence of geopolitical tensions, especially in commercial matters. This has intensified doubts about global growth, particularly in the United States, leading to a decoupling of the American economy’s financial markets from the rest of the world and a significant depreciation of the dollar. Pending further information, the impact of the deterioration of external conditions on the Chilean economy is expected to be limited. Nevertheless, uncertainty has increased considerably. In the immediate future, the local economy will continue to reflect the effects of the higher starting point of the last few months, in addition to a more positive evolution of some spending fundamentals. For this year, the growth range is raised to 1.75% to 2.75% and the expected growth for 2026 is maintained between 1.5% and 2.5%. Inflation is still projected to converge to 3% by early 2026, once the comparison base effects of cost increases are left behind. The Board will assess the next movements of the Monetary Policy Rate (MPR) bearing in mind the evolution of the macroeconomic scenario and its implications for the inflationary convergence.
What does this MP Report tell us?
Inflation has performed in line with forecasts but is still high and exceeding the 3% target of the Central Bank of Chile.
The Central Bank will continue to strive to bring inflation back to the 3% target, which is still expected to occur in early 2026.
In the past few months, the Chilean economy has outperformed projections, although the increase in global uncertainty remains one of the greatest risks it faces.
The BCCh will conduct monetary policy with caution, considering the importance of ensuring the convergence of inflation to the 3% target.
Inflation has performed in line with forecasts but is still high and exceeding the 3% target of the Central Bank of Chile.
- As of February, y-o-y inflation stood at 4.7%, in line with the Bank’s forecast in last December’s IPoM.
- Nonetheless, inflation is at a high level, above the 3% target. This is largely due to a great extent to the energy component, which inputs the adjustment of electric rates.
- Core inflation (which leaves out the most volatile items such as foodstuffs and energy) remains in the vicinity of 4% annually and has evolved somewhat below projections.
The Central Bank will continue to strive to bring inflation back to the 3% target, which is still expected to occur in early 2026.
- Annual CPI variation will see a fast drop during the second half of this year and the beginning of next year.
- This means that it will end the first half somewhat above 4.5%, turning back to 3.8% at December this year.
- This estimate considers the effect of the high comparison base associated to the electricity price hike.
- Accordingly, and unchanged from last December’s estimate, inflation is projected to converge to the 3% target early next year.
In the past few months, the Chilean economy has outperformed projections, although the increase in global uncertainty remains one of the greatest risks it faces.
- The Chilean economy posted 2.6% growth in 2024, more than projected in the last IPoM.
- This result was influenced by, among other factors, a great boost from exports in the fourth quarter.
- The year 2025 also began with a somewhat more dynamic economy, driven by an increase in the number of foreign tourists and still strong exports.
- Thus, for this year, GDP growth range is raised to 1.75%–2.75%, while maintaining expected growth for 2026 between 1.5% and 2.5%.
The BCCh will conduct monetary policy with caution, considering the importance of ensuring the convergence of inflation to the 3% target.
- At its March monetary policy meeting, the Board of the Central Bank of Chile decided to keep the policy rate unchanged at 5%.
- While inflation has been in line with forecasts, it is still high and facing significant risks, so caution is of the essence.
- We reaffirm our commitment of conducting monetary policy with flexibility, so that inflation converges to its defined 3% target. Having low and stable inflation is the best way the Central Bank contributes to the welfare of the entire Chilean population.