MNI BCCh Preview – Jan 2025: Pause In Easing Cycle Expected

Executive Summary

• The central bank of Chile is widely expected to pause its easing cycle, holding the key rate at 5.00%, amid rising near-term inflation pressures.
• Last month, the Board noted that latest inflation figures had exceeded the central bank’s forecasts, pointing to a possible pause in January and a slower pace of rate cuts beyond that.
• However, weak internal demand means the central bank is still expected to keep the door open to further gradual easing towards neutral over the coming months.

Click to view the full preview: MNI BCCh Preview - January 2025.pdf

The central bank struck a more cautious tone at its December monetary policy meeting, as the Board noted that latest inflation figures had exceeded the central bank’s forecasts, pointing to a possible pause at this week’s meeting and a slower pace of rate cuts beyond that. This was reiterated by Vice Governor Stephany Griffith-Jones, who told MNI earlier this month that the central bank will remain data-dependent as short-term inflation rises and pauses in the easing cycle cannot be ruled out. The Vice Governor added, however, that going forward weak internal demand is still likely to call for the policy rate to decline towards the neutral level, which is estimated to be around 4%.