MNI Chile CB Review - July 2025: Easing Cycle Resumes

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Executive summary:

• The Board of the Central Bank of Chile decided to lower its main interest rate by 25bps to 4.75%. The decision was adopted by the unanimous vote of all the Board members and was in-line with sell-side expectations.
• The Board sounded more comfortable about inflation risks given that headline inflation was lower than anticipated in the latest IPoM, although it also flagged that core inflation was running higher than expected, and continued to mention that further adjustments to monetary policy will be data-dependent.
• Sell-side analysts generally expect the easing cycle to continue at the next rate-setting meeting in September, with some expecting a further 25bp cut before year-end.

In its post-meeting statement, the MPC maintained guidance provided in the June meeting and in the monetary policy report (IPoM) that “if the central scenario of the June IPoM materializes, monetary policy will approach its neutral range in the coming quarters.” While the statement struck a more dovish tone on inflation overall – flagging the negative monthly CPI print in June – it cautioned that the main contributors to the decline came from the volatile components of the basket (such as food) and that core inflation actually came in higher than expected.