2Q26 Monetary Policy Report (IPoM): A More Balanced Risk Assessment

Research evidence excerpt

2Q26 Monetary Policy Report (IPoM): A More Balanced Risk Assessment

IdeaMlower due to weaker labor market conditions, lower real wage growth and softer

confidence, while investment is sharply downgraded for 2026. The offset comes

from a significantly larger fiscal impulse, with government spending assumptions

revised upward by roughly 1.2% of GDP relative to March. At the same time,

medium-term investment prospects improve materially, supported by stronger

copper prices and a 33% increase in the CBC project pipeline, leading the BCCh to

revise 2027 investment growth up to 5.0% from 3.2%.

The most important change is in the policy signal. In March, the corridor

embedded a meaningful probability of hikes, with the upper part of the distribution

allowing for a temporary tightening cycle toward 4.75% if inflation persistence

intensified. In June, that tightening bias effectively disappears. The new corridor

implies rates remaining broadly unchanged at 4.50% through most of the projection

horizon, with only one residual 25bp cut around September 2027, taking the policy

rate to the midpoint of the neutral range at 4.25%. Importantly, the shift in the

corridor is not uniformly dovish. Relative to March, the lower bound moved down by

roughly 40bp on average, reflecting weaker activity and a more balanced inflation

outlook, while the upper bound moved up by around 20bp on average, preserving

protection against a more persistent inflation scenario.

The risk assessment also becomes more balanced. In March, risks were clearly

skewed toward higher inflation through stronger second-round effects and a more

persistent oil shock. While those risks remain present, the June report explicitly

states that the balance of inflation risks has become more balanced. The downside