Policy rate stabilizes after a substantial easing cycle
Recent dynamics
Chile entered 2024 with the TPM at 8.25%. Monetary easing progressed rapidly during the first half of the year, with successive reductions bringing the policy rate to 5.75% by June.
The pace of easing subsequently became more gradual. Additional reductions brought the TPM to 5.50%, then 5.25%, and finally 5.00% toward the end of 2024.
The policy rate then remained unchanged at 5.00% for an extended period before another 25-basis-point reduction lowered it to 4.75% during 2025.
A further 25-basis-point cut subsequently brought the TPM to 4.50%. The rate has remained unchanged since then, leaving the latest level 0.25 percentage point below its position one year earlier.
Interpretation and economic signal
The policy trajectory shows a clear transition from relatively rapid easing to a much more cautious phase. Most of the reduction in the TPM occurred earlier in the cycle, while subsequent adjustments have been smaller and separated by longer periods of stability.
From the beginning of 2024 to the current level, the policy rate has declined by approximately 3.75 percentage points. This represents a substantial reduction in the nominal degree of monetary restraint relative to the earlier high-rate environment.
The extended period at 4.50% suggests that policy has shifted from active rate normalization toward a more cautious wait-and-assess stance. Rather than continuing to lower the TPM at a regular pace, the central bank has allowed the existing level to remain in place for an extended period.
Stability in the nominal policy rate does not by itself establish whether monetary conditions are neutral, restrictive, or expansionary. That assessment also depends on inflation, inflation expectations, real interest rates, and broader financial conditions.
The current signal is therefore less about additional monetary easing and more about consolidation after a substantial reduction in rates. A renewed change in the TPM would provide clearer evidence that the policy cycle has entered another phase.
Conclusion
Chile's TPM remains at 4.50% after a cumulative decline of approximately 3.75 percentage points from the higher levels observed at the beginning of 2024.
The easing cycle has become progressively more gradual, with long periods of unchanged policy separating the most recent rate reductions.
The current signal is therefore one of policy-rate stability following substantial monetary easing rather than an active sequence of further rate cuts.