In April, the inflation rate rose by 1.3% month-over-month, slightly below the 1.5% expected by the market, and so far there is no evidence yet of higher energy prices being passed on to other categories in the basket, which is reflected in underlying pressures that remain contained.  

The rise in energy prices accounted for much of the change, specifically through the transportation category, which contributed 1 percentage point to the monthly figure. Excluding that effect, the variation stood at 0.3%, in line with the historical average for the month. This should help temper the likelihood of a rise in the MPR, a scenario that the interest rate market currently has partially priced in. 

However, short-term inflation expectations remain high; inflation forwards project a rate of 4.5% for 2026, so we expect that the Central Bank will opt to maintain a cautious stance before making any further rate moves. The reason is clear: uncertainty surrounding the geopolitical conflict remains high, and the Central Bank needs greater certainty regarding its outcome. It is worth noting that we are only 1–2 cuts away from the TPM reaching its neutral level, which reduces the urgency to act in the short term. 

In terms of fixed-income strategy, we remain highly confident in UF, but through active strategies capable of capitalizing on opportunities across different segments of the yield curve. We favor high-quality bank bonds, especially with maturities of 3 to 5 years, where the risk-return profile is more attractive than in comparable corporate alternatives. For conservative investors, the 1- to 3-year segment continues to offer inflation protection with lower volatility. 

In the equity market, in terms of relative returns, Chile has lagged behind Latin American and emerging market stock exchanges, a gap explained by three factors: the deterioration in the terms of trade due to oil prices, the slowdown in economic activity, and the rise in discount rate expectations. 

We believe that these three factors will be temporary rather than structural. First, copper is already trading above $6 per pound, which should support a gradual improvement in the terms of trade as the oil shock dissipates. Second, a de-escalation of the conflict would reduce both the risk premium and pressure on discount rates; and third, the eventual passage of President Kast’s pro-investment reform should have a positive impact on the corporate environment. 

Otherwise, current valuations remain attractive. The IPSA is trading at around 12.3 times future earnings, below the average for the past 10 years. Furthermore, we believe that average has been punished by two events—the social unrest and the pandemic—which significantly compressed multiples. We believe that targeting valuations of 16 times (the pre-crisis average) in the medium term seems reasonable, provided that catalysts such as the end of the geopolitical conflict and the approval of government-led reform materialize. 

From a sectoral perspective, we remain bullish on commodities and banks, supported by higher export prices (copper, lithium) and positive corporate earnings.  

In the commodities sector, we believe that trends such as the energy transition and the construction of data centers for artificial intelligence will continue to drive up demand for critical materials like copper and lithium, which could lead to a shortage in the medium term. 

In the banking sector, we believe that the recent weakness in stock prices over the past few weeks is unwarranted, and we maintain a positive outlook on Chilean banks, as we noted in our March 28 report (SEE MORE), in a context of higher inflation, banks tend to benefit from improved margins, which translates into a positive impact on earnings. Within the sector, Banco de Chile appears to be the best positioned, both due to its greater sensitivity to inflation and the quality of its balance sheet.  

The sector’s results for April reflect this trend. For example, Banco de Chile posted a solid monthly performance, driven by robust growth in net interest income (+47% month-over-month, +16% year-over-year), supported by a positive change in the UF, which more than offset the increase in expenses. Combined with a lower tax rate, this resulted in CLP 131 billion in earnings and a ROAE of 29%. 

May is likely to be a stronger month, as the UF change will be 1.2%, up from 0.7% in April. We believe the second quarter of 2026 will be the best of the year.  

All things considered, we maintain a positive outlook on both asset classes. While geopolitical uncertainty calls for caution, we believe that the attractive yields offered by fixed income and positive catalysts for equities in the medium term offer a good opportunity to position portfolios in Chile for the remainder of the year. 

DISCLAIMER.

Tomás Fernández 
Portfolio Management Analyst