Chile’s central bank will likely keep its key interest rate unchanged for a seventh straight meeting on Tuesday, while investors warn that resurging inflation threats will make it harder to stay on hold going forward.

Board members led by Rosanna Costa will leave borrowing costs at 4.5% after markets close, according to all analysts surveyed by Bloomberg. Still, markets are pricing in the near certainty of a quarter-point rate hike within six months, a sharp shift from September, when they saw tightening beginning roughly a year out.

Chilean investors see pressure for higher rates mounting as inflation expectations two years ahead rise above the 3% target. Price pressures are coming in on multiple fronts — the prolonged Middle East conflict is making fuel more expensive, the peso has weakened and global interest rates are running high. Together, those forces are challenging the central bank’s forecast for inflation to return to its goal in the second quarter of 2027.

“The risks to the policy-rate path are now tilted more toward potential hikes than an extended hold,” said Samuel Carrasco, chief economist for Chile at Credicorp Capital. “We expect policymakers to adopt a more hawkish tone in the statement, opening the door to possible rate hikes in December or during the first quarter of 2027.”Chile’s cost of living rose 4.1% in September from a year prior, and traders are already bracing for bigger increases. The forwards market for Unidades de Fomento — an inflation-indexed accounting unit — shows consumer-price rises peaking at 5.4% in February before falling below 4% in April.

From that moment on, the market outlook improves only gradually. Traders see annual inflation slowing to 3.2% in 24 months, according to a central bank survey published on Oct. 22.

Scotiabank economists are sounding the alarm over inflation risks. For starters, analysts cite the depreciation in the peso — which has weakened to an 18-month low — and the potential pass-through to core prices.

Their economists also point to government spending that is now expected to grow 1.5% in 2027 — more than double the pace assumed by the central bank in its September monetary policy report.

Those factors led Scotiabank to forecast “a shift in the tone of monetary policy on Oct. 27 and a 25-basis-point rate hike at the Dec. 15 meeting, with a possible additional 25-basis-point increase at the January 2027 monetary policy meeting,” economists led by Jorge Selaive wrote in a note this month.

And Scotiabank published its projection even before Chile’s state oil refiner Enap announced a fifth consecutive fuel price hike. Diesel rose roughly 6.7% on Thursday, while 93- and 97-octane gasoline climbed 2.9% and 2.8%, respectively.

Finance Minister Jorge Quiroz said last week that the government is still spending about $80 million a week to cushion fuel increases, but warned that further adjustments will be necessary if global pressures persist.

Brent crude has traded above $100 since September and is near the highest since late April amid heightened supply concerns. The global benchmark has surged more than 90% this year after Persian Gulf flows were disrupted by the Iran war.

“The shock is no longer temporary, and those higher costs are very likely to start spilling over into other sectors of the economy,” said Alexis Vega, head of market making at Banco de Credito e Inversiones. “The danger is that those effects begin to unanchor inflation expectations.”Chile’s sharp economic slowdown provides some relief from the tough inflation outlook. In recent months, activity has come under siege from a combination of high unemployment, severe weather, mining disruptions and weak investment.

Quiroz offered a particularly gloomy assessment on Wednesday, saying copper output could fall 8% to 9% this year and shave one percentage point directly from GDP, plus another half-point through knock-on effects.

Put together, analysts surveyed in October by the central bank see GDP inching up just 0.2% this year. At the same time, they now see growth bouncing back to 3% in 2027.

Next year, central bankers and private-sector economists anticipate an investment revival from the government’s recently-approved economic omnibus bill that includes a series of tax cuts. Furthermore, Quiroz said he expects a “large injection” of public-sector activity in the final quarter of 2026 and first half of 2027 from government spending directed at “construction, public works, housing and municipalities.”Globally, investors will remain wary of upward pressure to borrowing costs not only from uncertainties in the Middle East, but also from the Federal Reserve, which is likely to hold rates on Wednesday before delivering 25 basis points of more tightening in its December meeting.

“We expect the central bank to remain on hold at this meeting and possibly at the next one in December,” Vega said. “But if inflation expectations materialize and the Fed continues raising rates, the possibility would begin to emerge that the Chilean central bank’s next move would be a hike.”