The sound of silence
The August economic activity data represented something of a setback. We treat these signals with caution: base effects from a year ago remain relevant, and the within-sector pattern is irregular. One-offs continue to drive commerce figures. The level of seasonally-adjusted manufacturing remained high in August, but its composition argues for restraint in extrapolating too much.
Business confidence has remained in pessimistic territory, with little change since April. Credit dynamics reinforce the negative message from investment. One notable exception is mortgage demand, largely on new government subsidies.
Two favorable consecutive prints hint that the labor market may be slowly emerging from stagnation. The unemployment rate fell, and job creation continued. Wages are supporting consumption, but with less punch than at the beginning of the year.
Although September’s CPI was in line with expectations, signals of persistent inflation re-emerged, suggesting that convergence to the Central Bank’s 3% target could be somewhat slower. A just-discovered but long-standing pricing error in the electricity tariff, which prompted the resignations of the energy minister and the head of the National Energy Commission (CNE), is a new source of uncertainty surrounding monthly prints.
Calm endures —unsettlingly so— with only small shifts in yield curves and low volatility, consistent with a late-cycle, data-dependent regime. The Monetary Policy Rate (TPM) is expected to reach 4.5% by December —or, at the latest, January 2026— with no follow-up move expected until late 2026. The market has been flirting with a terminal rate slightly above the 4% midpoint of the Central Bank's range of estimates for the neutral rate.
Less than a month before Chile’s November 16th presidential election, the government has been shaken by revelations that the National Energy Commission has been double-counting inflation, and overcharging consumers for years, leading to the resignation of the minister of energy. The scandal joins a string of controversies, yet public opinion appears remarkably stable: both President Gabriel Boric’s and candidate Jeannette Jara’s approval ratings remain solid. Meanwhile, José Antonio Kast’s lead is threatened by Johannes Kaiser, whose far-right rhetoric pulls the conservative bloc further from the center. Kast remains favored to win the runoff, but the rise of Kaiser’s National Libertarian Party could complicate both coalition-building and governance.
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