Chile's central bank holds benchmark interest rate at 4.50%

By Fabian Cambero and Inigo Alexander

SANTIAGO, Jan 27 (Reuters) - Chile's central bank on Tuesday held its benchmark interest rate at 4.50% in a unanimous decision, in line with expectations, as inflation remains within the bank's target range but ticked up slightly last month.

The decision follows a 25 basis point cut in December and two consecutive holds in September and October.

In December 2025, inflation came in at 3.5%, up slightly from the 3.4% registered in November last year but still within the central bank's target range of 3%, plus or minus one percentage point.

In a statement announcing the rate hold, the bank said Chile's short-term inflation outlook has improved.

"The macroeconomic scenario shows that inflation, in the short term, will be lower than expected in December, with demand evolving in line with projections," the bank said, noting that two-year inflation expectations are steady at 3%, according to both economists and financial market surveys.

The central bank said its board would assess future decisions taking into account the evolution of the macroeconomic scenario and its implications for inflation convergence to 3%.

Traders polled by the bank in December have predicted the monetary authority will likely hold the 4.5% rate through next June.

However, "with inflation near target and activity evolving broadly as forecast, the Chilean central bank retains scope to ease further once clarity improves on the global outlook and domestic momentum," said Andres Abadia, chief Latin America economist for Pantheon Macroeconomics, who described the board's tone as "neutral to dovish."

"Our base case remains for moderate rate cuts in Q2, taking the policy rate toward 4.0%, contingent on sustained disinflation and CLP stability," Adabia said.