Chile Central Bank Cuts 2026 Growth Forecast to 0.25 Percent
Chile’s central bank lowered its 2026 growth projection for the third time this year. The economy is now expected to expand by only 0.25 percent to 0.75 percent.
The central bank of Chile reduced its economic growth forecast for 2026 to a range of 0.25 percent to 0.75 percent. This marks the third downward revision in the current year. The previous estimate stood at 1 percent to 1.75 percent.
Policymakers held the benchmark interest rate at 4.5 percent on Tuesday. This was the sixth consecutive meeting without a change. The decision was unanimous among board members.
Inflation and Fuel Prices Pressure Consumers
Consumer prices in Chile rose 4.1 percent year over year in August. Monthly inflation reached 0.6 percent, double the median analyst forecast. Food and transportation costs were the primary drivers of this increase.
Fuel prices have climbed as the conflict in the Middle East intensifies. Crude oil prices have approached 100 dollars per barrel. These higher energy costs are weighing on household budgets.
Economic Activity Fell in July
Economic activity in Chile dropped 1.7 percent in July. This was the largest monthly decline since 2022. Mining, commerce, and services sectors all contributed to the contraction.
Severe weather conditions in July compounded existing economic headwinds. Consumer confidence remains weak. The central bank noted that domestic demand slowed in the second quarter and early third quarter.
Government and Bank Views Diverge
President Jose Antonio Kast expects the economy to improve by the end of 2026. He cites upcoming tax cuts as the driver of this recovery. The central bank, however, warns that current weakness may persist longer than anticipated.
According to GN markets/policy (en-US) reporting, the central bank flagged high uncertainty. Risks from the Middle East conflict are cited as a key factor. The bank remains cautious about the duration of the economic slowdown.
