(Bloomberg) -- Chile’s central bank held its key interest rate unchanged for the second straight meeting with policymakers signaling they’re in no rush to adjust borrowing costs as global economic uncertainty worsens.

Policymakers led by Rosanna Costa voted unanimously to keep borrowing costs steady at 5% late on Friday, as expected by all analysts in a Bloomberg survey. In a statement, board members warned of more doubts on the international economy in the face of rising geopolitical risks, tariffs implemented by the US and also the responses of countries affected by those trade barriers.

“The overall background information at hand points to an inflationary outlook that continues to face significant risks, stressing the need for caution,” policymakers wrote. The board will assess the next key rate movements “bearing in mind the evolution of the macroeconomic scenario and its implications for the inflationary convergence.”

Central bankers are standing pat on rates as they try to make sense of swings in the global economy. A slowdown in domestic inflation has also stalled, with prices rising faster than the 3% target, following a series of electricity hikes. Still, the peso has rebounded roughly 10% from a near-record low in early January, keeping a lid on cost-of-living forecasts even as activity firms.

“The central bank continues to be cautious. They are aware of inflation risks and underscored the uncertainty in global politics,” said Sebastian Diaz, an economist at Pacifico Research. “Our base case outlook is for a quarter-point rate cut around the middle of the year and then another one in September.”

Copper

In February, US President Donald Trump signed an executive action directing the Commerce Department to examine possible tariffs on copper, Chile’s biggest export. That threat has propelled global prices of the red metal and bolstered the nation’s currency along with it.

Indeed, policymakers noted that copper prices have risen nearly 8% since their prior rate-setting meeting in January, with that increase “influenced by Chinese demand and a significant rise in its price in the United States, which was affected by the tariffs threat.”

“The peso appreciated close to 7%, driven by the global weakening of the dollar and the improved copper price,” they wrote.

Meanwhile, data from the end of 2024 and start of 2025 show Chile’s economy has been more dynamic than expected, board members wrote. Both private consumption and investment are recovering gradually and the labor market is showing limited slack with above-average wage growth, they said.

Gross domestic product rose 2.6% last year, the central bank reported on Tuesday, above its estimate of 2.3% from December. Data for early 2025 has shown strength in sectors such as commerce.

What Bloomberg Economics Says

“Chile’s central bank held its benchmark rate on Friday, citing lingering inflation risks. And given heightened global uncertainty, it’s likely to stay on hold as policymakers evaluate more data before resuming the easing cycle. Surprisingly strong activity and recovering domestic demand also ease pressure to cut rates. We see the central bank waiting until June for its next reduction, pausing intermittently and ending the cycle with rates near neutral at 4.25% in the fourth quarter.”

— Felipe Hernandez, Latin America economist

Chile’s inflation outlook still gives reason for caution. Consumer prices rose 4.7% from a year prior in February, and traders surveyed by the central bank see cost-of-living rises above target in the bank’s two-year policy horizon.

“We believe the board only discussed holding the key rate steady in this meeting,” said Andres Perez, chief economist for Latin America at Banco Itau. “We expect the central bank to keep the key rate at 5% through the rest of the year.”

The central bank will publish its latest economic forecasts in its quarterly monetary policy report on Monday.

--With assistance from Giovanna Serafim and Rafael Gayol.

(Re-casts story, adds comments from central bank statement starting in second paragraph, economist comments starting in 5th)