Publications

Following the 25bp cut in September, the Central Bank maintained its policy rate at 4,25 % in October. The virtually neutral stance of monetary policy is consistent with the benign inflation outlook and economic activity around its potential. We keep expecting the policy rate to remain at 4,25 % in the coming months.

Monthly inflation in September was 0.32%, above the expectations of analysts (0.24% according to the Central Bank’s survey) and BBVA Research (0.23%). As a result, annual inflation stood at 5.18%, an increase of 8 basis points compared to August, marking three consecutive months of increases.

In 2025, the current account deficit would increase slightly due to a larger trade deficit driven by strong domestic demand, which lifts imports while exports grow only moderately. Remittances and a moderate primary-income deficit would partly offset it, and FDI would continue to finance it.

In the midst of a year of global uncertainty, both due to economic and geopolitical factors, Latam has shown a particular resilience that has manifested itself in the appreciation of its currencies and the reduction of its risk premiums.

Consumer inflation came in well above the market expectations at 3.2% m/m and 33.3% y/y. The deterioration in the underlying trend and its potential impact on still unanchored inflation expectations materially increase the likelihood of a year-end inflation of above 30%, also raising upside risks on the next year’s path.

Social Security affiliation increased by 31,500 people and unemployment fell by 4,800 in September. Adjusted for seasonality (SA), the number of contributors is estimated to have risen by 47,000, while the number of unemployed decreased by 22,000. In 3Q25, employment grew by 0.5% QoQ (SA) and unemployment dropped by 1.1%.

This paper presents a methodological framework to quantify the economic impact of natural disasters. It estimates a damage function and measures employment effects using a dynamic spatial model. The 2024 DANA in Valencia validates the approach and highlights the importance of both location and compensation mechanisms.

Lima’s CPI rose 0.01% m/m in September. Lower prices for rents, electricity, cars, fuels, airfares, and poultry products contained inflation. On an annual basis, inflation increased from 1.1% in August to 1.4% in September, due to a low comparison base.