(Bloomberg) -- Chile’s central bank kept its benchmark interest rate unchanged at the highest level in more than two decades, while reiterating that borrowing costs wouldn’t fall until a slowdown in inflation was consolidated.

Policymakers led by Rosanna Costa voted unanimously to hold rates steady at 11.25% for the second straight meeting on Thursday, as expected by all analysts in a Bloomberg survey. The forward guidance was identical to the statement in December.


“Inflation remains very high and its convergence to the 3% target is still subject to risks,” policymakers said. “The Board will maintain the MPR at 11.25% until the state of the macroeconomy indicates that this process has been consolidated.”

Some analysts had forecast a more dovish tone after the initial effects of the tightening cycle became evident, with inflation coming off a three-decade high and demand cooling. Yet annual price growth is still running at over four times the target rate, and the activity downturn is occurring more gradually than many economists expected.

“The market expected a statement that anticipated cuts in April, but the statement was identical to the one from the previous meeting,” said Sebastian Diaz, an economist at Pacifico Research. “From that point of view, a hawkish reading of the market is possible. The central bank continues with a cautious position.”

Read more: Chile’s Inflation Eases as Central Bank Sticks to High Rates 

The annual inflation rate ticked down to 12.8% in December from 13.3% the month before, according to the national statistics institute. Policymakers noted today that inflation expectations for two years ahead remain above the 3% target.

Earlier in January, the government unveiled a social aid package worth $2 billion to blunt the effects of a weakening economy. The plan will mostly be financed by resources from this year’s budget and won’t pressure inflation, according to Finance Minister Mario Marcel.

Chile’s push to tame consumer prices has gotten a boost from the peso, which has appreciated 9% since the prior policy meeting in December, easing the cost of imports.

Elsewhere in Latin America, Brazil is also holding its borrowing costs steady as its central bank battles above-target inflation. Meanwhile, other nations including Mexico, Peru and Colombia continue to raise their rates.

--With assistance from Rafael Gayol and Giovanna Serafim.

(Updates with analyst comment in the fifth paragraph.)

©2023 Bloomberg L.P.