2026/04/01 | Andrés Pérez M., Vittorio Peretti, Andrea Tellechea & Ignacio Martínez
The March monetary policy meeting minutes reflect a central bank increasingly concerned about near‑term inflation risks, while acknowledging a gradual loss of activity momentum. The Board agreed that the external shock stemming from the Middle East conflict represents a material change in the outlook (as outlined in the IPoM), primarily through a sharp rise in global energy prices and a weaker CLP, which together will push headline inflation higher in coming months. Board members noted that fuel price pass‑through is expected to be relatively fast in Chile, raising the risk that temporary shocks could spill over into services inflation. While recent inflation prints have surprised somewhat to the downside, the minutes stress that short‑term inflation expectations have risen meaningfully, even as medium‑term expectations (two‑year horizon) remain broadly anchored near the 3% target. Preserving credibility was repeatedly highlighted as a central policy objective.
Higher inflation, tighter global financial conditions to weigh on growth. The Board acknowledged that activity indicators have softened relative to expectations, with the January IMACEC affected by sector‑specific supply shocks in mining and agroindustry, and forward‑looking indicators pointing to moderating domestic demand. We note that February’s IMACEC came in well below market expectations and will require a swift recovery to match the BCCh’s 1Q26 forecast. Board members emphasized that tighter global financial conditions, higher long‑term rates, weaker equity markets, and increased external volatility are likely to weigh on growth going forward, while the fiscal consolidation announced in March adds another near‑term drag. The labor market was characterized as having slack, with limited job creation and no clear signs yet of overheating pressures from wages. However, the consensus view was that weaker activity alone does not justify an easing bias, given the inflationary impulse coming from energy and exchange‑rate dynamics.
Regarding policy options, the minutes are consistent with a hawkish hold at 4.5% in March. The baseline approach going forward is towards a meeting‑by‑meeting approach, assessing the magnitude and persistence of fuel price pass‑through, exchange‑rate effects, and movements in inflation expectations. At the same time, the Board was explicit that tightening remains an active option should short‑term expectations continue to rise, second‑round effects emerge, or inflation convergence be delayed beyond the two‑year horizon. Conversely, a downside scenario of markedly weaker activity was discussed, but members agreed that the bar for easing is very high in the current environment, as premature loosening could undermine credibility at a time of heightened global uncertainty.
Our take: The minutes reinforce the view that monetary policy risks are asymmetrically skewed toward a hold or potential hike, rather than a resumption of easing. Near‑term market pricing is likely to be driven by inflation expectations and energy price dynamics, although a meaningful slowdown in activity could help underscore the transitory nature of the cost shock, given limited domestic demand pressures. The one‑year breakeven inflation has surged to 5.4% (from 2.6% at end‑February), while the 1y1y forward has eased to 2.8% (from 3.3%), pointing to front‑loaded inflation concerns but more benign medium‑term expectations. In this context, managing the narrative around transitory shocks will be critical to keep inflation expectations anchored at the 3% target. The option of a preemptive hike comes into play if signs grow that medium-term CPI expectations start to trend up. The next monetary policy decision is scheduled for April 28. Ahead of that, March CPI will be published on April 8. We expect a 0.9% MoM increase, lifting headline inflation from 2.4% to 2.9% YoY. The BCCh’s analyst survey will follow on April 10, where medium term inflation forecasts will be a key metric to watch. Overall, above‑target inflation and uncertain second‑round effects tilt the BCCh’s risk balance away from a final cut and toward the possibility of tightening. Our baseline scenario has rates on hold at 4.5% with inflation peaking at 4.4% early next year, and ending 2027 at 2.9%.