The Central Bank of Chile has made the unanimous decision to maintain its monetary policy rate at 4.5%. This strategic move, detailed after its latest Monetary Policy Meeting, reflects a careful balance of external economic tailwinds and internal dynamics, all aimed at guiding the nation towards sustained price stability.
Global Economic Landscape and External Influences
The global economic environment presents a somewhat favorable outlook for Chile, largely driven by a stronger-than-anticipated performance in the U.S. economy during the third quarter. This positive external momentum is further bolstered by an increase in copper prices, a key commodity export for Chile, which now surpasses levels observed at the previous meeting's close. However, the Central Bank remains cautious, identifying ongoing global macroeconomic risks fueled by geopolitical, fiscal, and financial factors. Despite these broader concerns, financial conditions have notably improved for emerging economies, particularly in Latin America, marked by rising stock markets and appreciating currencies against the U.S. dollar.
Domestic Dynamics and the Path to Price Stability
Internally, Chile's financial landscape shows stability, with short and long-term nominal interest rates exhibiting limited movement and a reduced differential with the U.S. The Chilean peso has strengthened, and credit conditions remain largely stable across various segments, though the real estate sector has seen an uptick in demand. Economic activity, as measured by November's Imacec, registered modest monthly contractions in both total and non-mining output, yet the Central Bank anticipates many influencing factors to be transient. The labor market remains stable with unemployment unchanged and job creation somewhat subdued. On the inflation front, December saw annual rates of 3.5% for total inflation and 3.3% for core inflation, with expectations firmly anchored at 3% over a two-year horizon. The Central Bank anticipates a lower short-term inflation trajectory than previously forecast, reaffirming its commitment to a flexible monetary policy to achieve its 3% inflation target within the next two years.
