(Bloomberg) -- Chile’s central bank held its benchmark interest rate unchanged following 11 straight hikes and promised to keep it steady until policymakers are certain that inflation is on its way toward target.

Board members voted unanimously to keep borrowing costs at 11.25% late on Tuesday, as forecast by all 17 economists in a Bloomberg survey. In a statement, policymakers wrote they have made a “significant” adjustment to rates in an effort to iron out economic imbalances. 

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

The central bank led by Rosanna Costa has moved aggressively to tackle soaring inflation, driven by a boom in consumer spending, higher commodity prices and a weaker peso. The tighter monetary policy is starting to pay off, as demand cools and inflation expectations fall toward target.

What Bloomberg Economics Says

“The decision shows that the central bank is confident that higher rates are not necessary for the economy to continue with the adjustment that is already under way. The statement shows that the central bank is in no rush to start cutting rates, and suggests it will wait until having evidence that inflation is firmly on track to fall to 3% over a two year forecast before considering any cuts.”

—Felipe Hernandez, Latin America economist

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Read more: Chile Central Bank Signals It’s Too Early to Cheer Inflation Dip

In the statement, policymakers wrote global consumer price pressures are still high despite the recent downturn in some economies. Locally, two-year inflation expectations remain above the 3% target, they added. 

Chile’s annual inflation rate likely ticked up to 12.9% in November from 12.8% the month before, following two consecutive drops, according to the median estimate in a Bloomberg survey of economists. The national statistics institute will publish the consumer price report Wednesday morning.

“The central bank consolidated the outlook that rates will remain steady until the adjustments that they are seeking take hold,” said Nathan Pincheira, chief economist at Fynsa in Santiago. “There are chances of a rate cut in April, but it could also take a bit longer.”

Weak Investment

Chile’s gross domestic product shrank the most since the start of the pandemic in the third quarter on weakness in services, commerce and mining. The unemployment rate has stalled near 8%, as a softening labor market hastens the economic slowdown.

In its statement, the central bank said Chile’s economy has continued to cool after last year’s “massive” jump in spending.

“Most fundamentals continue to point to weaker investment going forward,” board members wrote. “Consumption continued to adjust downward, in line with the normalization of liquidity, slow job creation, falling real wages, and consumers’ pessimism.”

At the same time, they said the local credit market is slow and that lending interest rates are high in nominal terms.

The central bank will release its up-to-date forecasts on inflation and growth in Wednesday’s quarterly monetary policy report.

“The board maintains its view that it’s too soon to start cutting rates given that inflation continues to be elevated and monetary policy continues to play an important role in the economy’s adjustment,” said Martina Ogaz, an economist at Euroamerica.

--With assistance from Valentina Fuentes.

(Recasts story, adding details from central bank statement starting in second paragraph)

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