Chile MPC Minutes: Dovish Signals as Directors Flag Risks of a More Prolonged Slowdown and Below-Target Inflation

The central bank published the minutes from the September 8 Monetary Policy Committee (MPC) meeting, at which the MPC unanimously decided to keep its policy rate unchanged at 4.5%. In our assessment, while the MPC remains cautious amid "a higher-than-usual degree of uncertainty" and as "the conflict in the Middle East persisted and had even intensified recently," the minutes conveyed a dovish tone. First, Directors agreed that the economic backdrop and data leading up to the September meeting represented "a meaningful shift in the assessment of the domestic macroeconomic scenario." Second, regarding the balance of risks, the MPC highlighted that "attention should be paid to the possibility that a more persistent weakness in the economy could ultimately push inflation below the 3% target over the two-year horizon," adding that "monetary policy should retain its capacity to respond." Third, the MPC described the decision to hold its policy rate at 4.5% as "clearly dominant at this meetin