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    The central bank of Chile keeps interest rates at 4.75% due to trade uncertainty

    by VT Markets
    /
    Sep 9, 2025
    Chile’s central bank has kept the benchmark interest rate steady at 4.75%, and this decision was agreed upon by all members. Global trade tensions continue to create uncertainty, affecting the worldwide economy.

    Risk of Persistent Inflation

    The bank stated that they need more information to understand the risk of ongoing inflation before adjusting the rate to its neutral level. Core inflation is expected to be higher over the next year than previously predicted in June. The decision to maintain the 4.75% rate shows a cautious approach rather than a move toward easing. Markets had anticipated a rate cut by the end of the year, a belief that now seems too optimistic due to the bank’s concerns about persistent inflation. This indicates that short-term interest rate swaps might need to be adjusted upward in the coming weeks. Recent data for August 2025 shows inflation at 0.5% month-over-month, significantly higher than the 0.3% forecast. The bank’s revised core inflation forecast reflects this trend. We recall the global inflation surge from 2022 to 2023, and the bank is clearly determined not to make the mistake of easing too soon.

    Currency and Economic Outlook

    For currency traders, this cautious decision makes the Chilean Peso (CLP) more appealing, especially for carry trades. We expect the CLP to strengthen against currencies from central banks with a more relaxed stance, such as the US dollar. Buying CLP call options could be a smart strategy to take advantage of potential gains while controlling risk. The mention of external uncertainties is important, especially as recent manufacturing PMI data from China has fallen to 49.8. Since China is Chile’s main copper export market, any slowdown in China directly affects Chile’s economy and corporate earnings. The combination of higher local rates lasting longer and risks from external demand suggests a careful approach to Chilean stocks. This makes put options on the IPSA index a worthwhile hedging strategy. Create your live VT Markets account and start trading now.

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