Chile's central bank cut its policy rate by 25 basis points to 4.50 percent, its second rate cut in as many months, with the bank saying data for the third quarter confirmed its expectation that all components of demand were slowing down.
The Central Bank of Chile, which has now cut its rate by 50 basis points this year, also said that inflation was "behaving moderately and market expectations foresee that it will gradually normalize toward 3% within the next 24 months."
Chile's inflation rate fell further in October to 1.5 percent from 2.0 percent in September, below the bank's target range of 2.0-4.0 percent inflation around the 3.0 percent midpoint.
The central bank repeated that it would be flexible in its monetary policy with the aim of inflation at 3 percent.
"Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook," the bank said.
Chile's economy is growing moderately, the bank said after data showed that the country's Gross Domestic Product expanded by 1.3 percent in the third quarter from the second for annual growth of 4.7 percent, up from 4.0 percent.
The global economy is recovering gradually, the bank said, led by the United States while growth in emerging countries is more moderate.