(Bloomberg) — Chile’s central bank held its key interest rate unchanged for the second straight meeting with policymakers signaling they’re in no rush to adjust borrowing costs as global economic uncertainty worsens.
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Policymakers led by Rosanna Costa voted unanimously to keep borrowing costs steady at 5% late on Friday, as expected by all analysts in a Bloomberg survey. In a statement, board members warned of more doubts on the international economy in the face of rising geopolitical risks, tariffs implemented by the US and also the responses of countries affected by those trade barriers.
“The overall background information at hand points to an inflationary outlook that continues to face significant risks, stressing the need for caution,” policymakers wrote. The board will assess the next key rate movements “bearing in mind the evolution of the macroeconomic scenario and its implications for the inflationary convergence.”
Central bankers are standing pat on rates as they try to make sense of swings in the global economy. A slowdown in domestic inflation has also stalled, with prices rising faster than the 3% target, following a series of electricity hikes. Still, the peso has rebounded roughly 10% from a near-record low in early January, keeping a lid on cost-of-living forecasts even as activity firms.
“The central bank continues to be cautious. They are aware of inflation risks and underscored the uncertainty in global politics,” said Sebastian Diaz, an economist at Pacifico Research. “Our base case outlook is for a quarter-point rate cut around the middle of the year and then another one in September.”
Copper
In February, US President Donald Trump signed an executive action directing the Commerce Department to examine possible tariffs on copper, Chile’s biggest export. That threat has propelled global prices of the red metal and bolstered the nation’s currency along with it.
Indeed, policymakers noted that copper prices have risen nearly 8% since their prior rate-setting meeting in January, with that increase “influenced by Chinese demand and a significant rise in its price in the United States, which was affected by the tariffs threat.”
“The peso appreciated close to 7%, driven by the global weakening of the dollar and the improved copper price,” they wrote.
