Chile Central Bank Cut Interest Rate to 4.75% to Combat US Trade Tariff

Chile’s Central Bank Council has cut its monetary policy interest rate (TPM) by 25 basis points to 4.75% to address Global trade tensions and the effect of US trade tariffs.

This represents the first reduction this year, bringing the rate to its lowest level since January 2022, after it had been held at 5% since December 2024.

Reason For Decision

The decision was made amid a complex global environment characterized by uncertainty from trade tensions and persistent military instability.

“The external outlook continues to be marked by uncertainty associated with the evolution of trade tensions and their effects on the global economy, in a context in which the conflict between Iran and Israel has ended, but military tensions persist,” the Council noted.

It also pointed out recent announcements by US President Donald Trump regarding new 50% tariffs on copper imports (Chile’s main export) and all products from Brazil, effective August 1.

Domestically, the Central Bank observed that June’s inflation figure was lower than expected, with a -0.4% monthly variation, bringing the annual increase down to 4.1%. Core inflation also showed a zero monthly variation. While economic activity has evolved as projected, with growth in private consumption and capital formation, the labor market exhibits slow job creation and a rising unemployment rate.

The Central Bank indicated that future rate movements will depend on the evolution of the macroeconomic scenario and its implications for inflation convergence towards the 3% target within two years.