MNI Chile CB Preview - Jun 2025: Easing Cycle Resumption Nears

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Executive Summary

• The majority of analysts expect Chile’s central bank to keep its policy rate unchanged at 5.00% in June, amid a still uncertain external backdrop (exacerbated by recent geopolitical developments) and elevated inflation pressures.
• However, the BCCh has adopted a more dovish tone in Q2 and even discussed cutting the policy rate at the April meeting. Further benign inflation readings and improving inflation expectations suggest the resumption of the easing cycle is on the horizon, and there are some notable calls for the BCCh moving as soon as this week.
• Forward guidance will remain in focus in determining the potential scale of easing for the rest of 2025 and for assumptions regarding the terminal rate for the cycle.

In April, the Board adopted a more dovish tone, emphasising the uncertainties to the outlook due to the US administration’s tariff policies, while highlighting the need to remain cautious. Inflation is seen remaining high near-term, but it no longer sees significant risks to the outlook, and inflation is expected to converge towards target in the second half of the year, opening the door to a resumption of the easing cycle. 

According to the March monetary policy report, the Bank’s central scenario is consistent with that cycle resuming at the monetary policy meeting in September, with another 25bp cut to follow in December. However, the minutes to the April MPC meeting revealed that the Board already discussed the option of cutting by 25bp as soon as that month, before agreeing that it was necessary to gather more information to assess the impact of the external scenario and its implications for monetary policy.