2026/05/07 | Andrés Pérez M., Vittorio Peretti, Andrea Tellechea & Ignacio Martínez
The BCCh Board’s decision to hold the policy rate at 4.5% reflects a judgment that, despite a sharp rise in global uncertainty linked to the Middle East conflict, the available information is still insufficient to justify a change in the monetary stance. The Board emphasized that the macro environment is being shaped by a large external shock, but its size, persistence, and transmission to inflation and activity remain unclear. In this context, holding the policy rate was seen as consistent with the strategy laid out in the March IPoM, preserving continuity and credibility while avoiding premature moves.
Some Board members raised an alternative option of hiking the MPR by 25bps, reflecting concerns about upside inflation risks if the war drags on and commodity prices remain high. We believe these members see value in acting pre-emptively to ensure inflation expectations remain anchored, but potential downsides may come from tightening policy based on incomplete information, potentially amplifying a slowdown in activity.
The domestic economy has shown consumption performing in line with BCCh’s expectations, along with core inflation. In contrast, investment had performed somewhat below forecasts, and labor market pointed to weak job creation. However, it was noted that the Capital Goods Corporation (CBC)’s survey reflected a substantial correction, which would considerably raise the investment growth forecast. The minutes also covered the government’s most recent announcements, which could lead to a more limited fiscal adjustment than that considered in the March IPoM, whether due to the effects of the National Reconstruction Bill or increased spending pressures. With regards to inflation, the March core print came in broadly as anticipated, but close attention would be paid to factors that could lead to greater transmission and/or persistence of inflation.
Our Take: The decision conveys a hawkish hold. While the policy path remains unchanged for now, the Board stressed that strategy will be reassessed meeting by meeting, with particular attention to inflation expectations and pass-through dynamics. The key takeaway is that upside risks to rates remain asymmetric: if expectations begin to de-anchor or cost pressures prove persistent, a rate hike is a non-negligible possibility. Tomorrow the April inflation will be released. We expect a 1.5% monthly gain, with core pressure up by 0.5%.