Chile’s consumer prices experienced a 0.4% decline, marking the first monthly drop of the year and the steepest since late 2023. This unexpected decrease surpassed economists’ forecasts of a 0.12% decline and was primarily driven by falling prices in food, non-alcoholic beverages, apparel, and footwear. Consequently, annual inflation slowed to 4.1%, down from 4.4% in May, bringing it closer to the Chilean central bank‘s target range of 2% to 4%.
The central bank had previously maintained the benchmark interest rate at 5% for four consecutive meetings, citing persistent inflation and global uncertainties. However, the June data has fueled speculation that policymakers may consider resuming monetary easing. Analysts from Capital Economics suggest that the central bank could implement a 25-basis-point rate cut to 4.75% later this month.
In its latest Monetary Policy Report, the Banco Central de Chile projected that inflation would approach the 3% target in the second half of 2025, with the target being reached in 2026. The report also highlighted that the Chilean economy is expected to grow between 2.25% and 2.75% this year, with a moderation in economic activity in the second quarter.
Despite the recent decline in consumer prices, the central bank remains cautious due to global uncertainties and domestic factors such as the depreciation of the peso and rising energy costs. Policymakers have indicated that future monetary policy decisions will consider these significant risks, particularly concerning the short-term inflation outlook.
Overall, while the June 2025 data suggests a potential shift towards monetary easing, the central bank’s cautious stance reflects ongoing concerns about inflationary pressures and external economic factors.
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