The central bank's unanimous vote cut the policy rate to 10.25% (monetary easing cycle)

Consumer spending and private investment are expected to recover in the upcoming months, given lower financial costs

Given lower borrowing costs and contained inflation pressures, MNCs should anticipate robust demand in 2024. Thus, adequate strategies may involve the implementation of discount promotions, premium offerings, and an expanded array of products available for online purchases. Consider refinancing existing debt or securing new loans at lower rates, improving your working capital position, and bolstering overall financial flexibility. Additionally, within the B2B environment, prioritize industries more sensitive to interest rate cuts, such as construction, and sectors less likely to be directly affected by political risks, such as manufacturing or retail. Finally, although the tax reform is not expected to raise corporate taxes, companies should continue making proper inroads with the government and politicians across the aisle.


  • On July 28, Chile’s central bank decided to lower the monetary policy rate by 100 basis points, reaching 10.25%. The rate cut was approved unanimously by its board members and surpassed market expectations, which ranged between 50 to 75 basis points.
  • The central bank’s press release stated that the monetary easing cycle began mainly due to the consolidation of the inflationary convergence process. After reaching a peak of 14.1% in August 2022, annual inflation has gradually declined, standing at 7.6% in June 2023. Additionally, core inflation decreased from 11.0% in November 2022 to 9.1% in June, and two-year inflation expectations are aligned with the inflation target of 3%.
  • The economy has experienced a poor performance in 2023. Since February, the seasonally adjusted monthly activity index has accumulated four consecutive months of decline, driven by supply disruptions in the mining sector, weak manufacturing sector performance, and significant retail sector drops. Moreover, the unemployment rate remained high at 8.5% in June, significantly above the pre-pandemic average of 6.9%.

Our View

The downward trend of inflation is expected to persist throughout 2023 due to lower energy prices compared to 2022 and controlled supply disruptions. Our average annual inflation forecasts for 2023 and 2024 remain unchanged at 7.7% and 3.3%, respectively. Moreover, we anticipate the Chilean peso will not experience high volatility like in 2022. Our forecast for 2024 is a relatively stable exchange rate of 787 CLP:USD influenced by the beginning of the monetary easing cycle in the US and reduced political uncertainty. Despite the projected contraction of Chile’s GDP (-0.6%) in 2023, we expect a steady rebound of 2.2% in 2024, driven by loose financial conditions and a decrease in regulatory uncertainty. Consumer spending and private investment are projected to increase by 4.5% YOY and 1.0% YOY, respectively. Regarding future cuts, the central bank has indicated the possibility of a more pronounced reduction than the forecast presented in June’s Monetary Policy Report, which placed the policy rate between 8% and 10% by the year’s end. Two-year swap rates, a proxy of future borrowing costs, are at approximately 6.025%, and market expectations predict a policy rate of 8% by December 2023 and 4.5% by December 2024. Thus, we anticipate further rate cuts in the upcoming policy meetings scheduled for September 5, October 26, and December 19.

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