Chile’s Latest Interest Rate Decision: Stability Amidst Evolving Economic Dynamics
Table of Contents
Chile’s central bank announced on October 28, 2025, that the benchmark interest rate remains unchanged at 4.75%. This decision follows a series of rate cuts from 5.50% in September 2024, reflecting a cautious approach amid evolving macroeconomic conditions. The geographic scope centers on Chile’s domestic economy, while temporal focus covers the past 12 months with emphasis on the latest month’s data.
Drivers this month
- Inflation slowed to 3.80% YoY in September, down from 4.50% six months prior.
- GDP growth moderated to 1.20% YoY in Q3 2025, compared to 2.50% in early 2025.
- Unemployment held steady at 7.10%, slightly above the 6.80% average of 2024.
Policy pulse
The 4.75% rate sits below the 5.00% level seen throughout most of 2025 but remains above the 3.50% neutral estimate, signaling a cautious stance to balance inflation control and growth support.
Market lens
Immediate reaction: The Chilean peso (CLP) strengthened 0.30% versus the USD within the first hour, while 2-year government bond yields dipped 5 basis points, reflecting market relief at the steady rate decision.
Chile’s core macroeconomic indicators reveal a mixed but stabilizing picture. Inflation, a key driver of monetary policy, has eased from a peak of 7.20% YoY in mid-2024 to 3.80% in September 2025, according to the Sigmanomics database. This deceleration aligns with global commodity price normalization and subdued domestic demand.
Inflation and growth trends
- Consumer Price Index (CPI) rose 0.20% MoM in September, compared to 0.50% average monthly increases in early 2025.
- Industrial production growth slowed to 0.80% YoY, down from 3.10% in late 2024.
- Retail sales contracted 0.40% MoM in September, marking the first decline in six months.
Labor market and fiscal stance
Unemployment remains elevated at 7.10%, reflecting structural challenges despite a modest fiscal stimulus. The government’s budget deficit widened slightly to 2.80% of GDP in Q3 2025, up from 2.30% in the previous quarter, driven by increased social spending and infrastructure investments.
External shocks & geopolitical risks
Chile’s export-dependent economy faces risks from volatile copper prices and geopolitical tensions in key markets. Recent supply chain disruptions and trade uncertainties have pressured export volumes, though diversification efforts are underway.
This chart highlights Chile’s transition from a restrictive monetary policy to a more neutral stance. The stable rate at 4.75% amid easing inflation and slowing growth suggests a balancing act to avoid premature tightening or loosening.
Market lens
Immediate reaction: The CLP appreciated modestly, while short-term bond yields declined, indicating market confidence in the central bank’s measured approach. Breakeven inflation rates for 2-year horizons fell by 10 basis points, reflecting tempered inflation expectations.
Looking ahead, Chile’s monetary policy faces a complex environment shaped by domestic and external factors. The central bank’s forward guidance suggests a data-dependent approach, with three main scenarios emerging:
Scenario analysis
- Bullish (30% probability): Inflation continues to ease below 3%, growth stabilizes above 2%, prompting further rate cuts to 4.25% by mid-2026.
- Base (50% probability): Inflation hovers near 3.50%, growth remains modest around 1.50%, and rates hold steady at 4.75% through 2026.
- Bearish (20% probability): External shocks or commodity price drops reignite inflationary pressures, forcing a pause or hike back to 5.00%.
Monetary and fiscal interplay
Fiscal policy will play a critical role in supporting growth without exacerbating inflation. The government’s moderate deficit expansion is sustainable but requires vigilance to avoid crowding out private investment.
Geopolitical and structural risks
Ongoing geopolitical tensions and structural labor market issues could dampen growth prospects. Diversification of export markets and investment in productivity remain key long-run priorities.
Chile’s interest rate decision to maintain the policy rate at 4.75% reflects a prudent stance amid easing inflation and slowing growth. The central bank balances the risks of premature easing against the need to support a fragile recovery. Market reactions suggest confidence in this calibrated approach, though vigilance is warranted given external uncertainties.
Structural reforms and fiscal discipline will be essential to sustain long-term growth and price stability. The coming months will test the resilience of Chile’s economy as it navigates global headwinds and domestic challenges.
Key Markets Likely to React to Interest Rate Decision
Chile’s interest rate decision influences several key markets, notably the Chilean peso and domestic financial assets. The following symbols historically correlate with monetary policy shifts and provide insight into market sentiment and economic outlook:
- USDCOP – Reflects regional currency dynamics influenced by Latin American monetary policies.
- BSAC – Banco Santander Chile, sensitive to interest rate changes affecting banking sector profitability.
- LTM – Latam Airlines, impacted by economic growth and fuel price volatility.
- BTCUSD – Bitcoin, often viewed as a risk asset reacting to monetary policy shifts globally.
- CLPUSD – Directly tracks the Chilean peso’s performance against the US dollar post-decision.
Insight Box: Interest Rate vs. CLPUSD Since 2020
Since 2020, the Chilean peso’s exchange rate against the USD has shown a strong inverse correlation with the central bank’s policy rate. Periods of rate hikes, such as mid-2024’s peak at 5.50%, coincided with CLP appreciation, while easing phases saw depreciation. This dynamic underscores the peso’s sensitivity to monetary policy shifts and inflation expectations.
FAQ
- What is the latest interest rate decision for Chile?
- The central bank held the policy rate steady at 4.75% on October 28, 2025, maintaining a pause after prior cuts.
- How does this decision compare to past readings?
- The rate is down from 5.50% in September 2024, reflecting easing inflation and moderated growth over the past year.
- What are the macroeconomic implications of this decision?
- The steady rate balances inflation control with growth support amid external risks and fiscal pressures, signaling cautious optimism.
Key takeaway: Chile’s central bank is navigating a delicate balance, maintaining rates to support a fragile recovery while guarding against inflation risks.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The current policy rate of 4.75% remains unchanged from the previous month and is below the 12-month average of 5.10%. This steady stance contrasts with the aggressive tightening seen in late 2024, when rates peaked at 5.50%. The chart below illustrates the gradual easing trend over the past year.
Inflation’s downward trajectory from 7.20% to 3.80% YoY parallels the rate cuts, while GDP growth’s moderation signals a cautious economic environment. The interplay between these indicators suggests the central bank’s pause aims to assess lagged effects of prior hikes.