Bank of America anticipates that Chile’s central bank will maintain its policy rate at 4.5% through the end of this year, even after a sharp rise in fuel prices earlier in 2026. The bank’s projection includes two increments of 25 basis points each in 2027, on the conditional view that GDP growth rebounds to 2.9% supported by pro-growth reforms and elevated copper prices.
Recent monthly inflation figures for Chile indicate slower-than-expected price increases. In May, consumer prices rose 0.2% month-over-month, against a consensus forecast of 0.4% and a marked slowdown from the 1.3% increase reported in April. The weaker reading suggests limited pass-through from wholesale fuel costs, which had surged between 41% and 54% by the end of March.
On a 12-month basis, headline inflation eased to 3.9% in May from 4.0% in April, bringing the rate back within the central bank’s target range. Bank of America’s preferred inflation gauge, excluding volatile items, fell to 3.2% year-over-year from 3.4% the previous month. Core inflation excluding food and energy was recorded at 2.9%, a slight uptick from 2.8%.
Reflecting these developments, Bank of America adjusted its inflation outlook for Chile to 4.2% for 2026, down from an earlier estimate of 4.3%. The bank projects inflation will moderate to 3.2% in 2027.
Activity indicators paint a softer picture of the economy. Seasonally adjusted economic activity was flat quarter-over-quarter for the three months through April. On an annual basis, GDP contracted by 0.7% in the January-April period compared with the same months in 2025. Labor market data show the unemployment rate rising to 9.1% on a seasonally adjusted basis from 8.5% in December.
Disaggregated price movements in May were mixed. Food prices fell 0.8% month-over-month, with bread and flour falling 2.1% and fruit prices down 5.0%. Transport costs increased 0.6% over the month, while retail fuel prices rose modestly by 0.7%.
The bank’s interest-rate trajectory rests on the assumption of a growth rebound to 2.9% in 2027 attributable to pro-growth reforms and stronger copper prices. Absent that recovery, Bank of America’s forecast implies policy would likely stay on hold through the near term at the current 4.5% setting.