Chile's central bank holds at 4.50% on Middle East oil shock risk

Chile's central bank held its benchmark interest rate at 4.50% in a unanimous decision, with the Banco Central de Chile (BCCh) board citing the worsening Middle East conflict as a key factor weighing on the policy outlook. The bank noted that the war's impact on the global economy has proven more adverse than the central scenario set out in its March Monetary Policy Report (IPoM), and warned that further escalation raises the risk of deeper inflation alongside a sharper global economic slowdown.

The board specifically flagged the risk that an extended conflict could keep Crude Oil prices elevated for a prolonged period, a particular concern for a small open economy with substantial external cost-push exposure through the energy import channel. The hold leaves Chilean policy on a wait-and-see footing while officials weigh the disinflation already evident in domestic data against renewed supply-shock risks, with the next quarterly IPoM expected to revise external assumptions materially given how quickly the post-March backdrop has deteriorated.

CCBh key highlights

Chile's central bank: worsening Middle East tensions raise risk of deeper inflation and global economic slowdown.
Middle East war impact more adverse than expected in March monetary policy report.
Extended Middle East conflict raises risks of sustained high oil prices.
Benchmark interest rate steady at 4.5%.
Decision was unanimous.