MNI BCCh Preview – Apr 2025: Caution To Prevail

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Executive Summary

• The BCCh is widely expected to keep its policy rate unchanged at 5.00% for a third successive meeting on Tuesday, amid persistent inflation pressures and a highly uncertain external backdrop.
• Headline inflation remains above target, but with concerns over the growth outlook mounting due to the US administration’s tariff policies, the Board may soften its hawkish stance to keep the door open to renewed rate cuts in the second half of the year.

At its March monetary policy meeting, the Board continued to strike a slightly hawkish tone, with the forward guidance emphasising the significant risks to the outlook, which remains consistent with an extended pause ahead. Governor Rosanna Costa said that she expects headline inflation to remain in a 4.5-5% range through the first half of this year and that the inflation outlook requires caution in monetary policy. The cautious message was reiterated in the central bank’s Q1 monetary policy report, which pointed to a delay in the resumption of the easing cycle until September.

Since then, however, the shock from the US administration’s tariff policies have changed the global outlook significantly. For a small, open economy such as Chile’s this could have important implications, and Governor Costa has said that the central bank is monitoring the situation closely, although she notes that it is too early to draw conclusions on the impact of the tariff hikes on Chile. Latest central bank survey data reveal, however, that analysts have brought rate cut expectations forward slightly, amid mounting growth concerns, with 50bp of easing now seen in the second half of the year, vs. 25bp expected previously.