FX.co ★ Chile Lowers Interest Rate by 25 bps

The Central Bank of Chile has reduced its benchmark interest rate by 25 basis points, bringing it down to 4.75%. This decision, reached unanimously during their July meeting, reflects ongoing global uncertainties and mixed indicators domestically. Although the conflict between Israel and Iran has concluded, military tensions persist, and new tariffs introduced by the U.S. have impacted global trade dynamics, affecting countries such as Brazil and sectors like copper. Despite these challenges, the reaction from international financial markets has been relatively subdued. Chile's economic performance remains largely consistent with the forecasts outlined in the June Monetary Policy Report. Specifically, June's inflation figures came in lower than anticipated, with the headline Consumer Price Index (CPI) decreasing by 0.4% month-on-month, though core inflation showed no change. On the domestic front, both consumption and investment are on the rise, yet the labor market is experiencing sluggish job creation and increasing unemployment. The Central Bank has reiterated its commitment to steering inflation toward their 3% target over the next two years, indicating a flexible stance regarding future monetary policy adjustments.