Fed's Rate Hike Triggers Chile's Currency Crisis Despite Stock Rally

The Federal Reserve's first rate hike in three years — a move that rattled global markets on Wednesday — failed to dampen risk appetite for long, and Chile felt it from both sides at once: the stock market rebounded sharply while the dollar settled above $960 for the first time in nearly a year, revealing a tension that neatly encapsulates the macroeconomic dilemma the country now faces.

The IPSA closed Thursday's shortened session — trimmed ahead of the September 18 holiday — up 1.30%, reaching 11,381 points. The advance moved in sync with Wall Street, where the Nasdaq gained 1.69%, the S&P 500 1.13% and the Dow Jones 0.62%, driven by tech heavyweights: Nvidia, Amazon and Microsoft led the recovery after the initial volatility triggered by the Fed's decision. Yields on the 10-year U.S. Treasury eased, retreating below the 5% threshold they had breached on Wednesday, providing some relief to global fixed-income markets. Bice Inversiones noted that "following the recent correction, the local market once again offers an attractive entry point in terms of valuation relative to its own history and regional comparables, in a context of healthy corporate earnings growth in 2026 and progress in Congress on pro-investment reforms."

But the equity reprieve does not erase the week's most significant development: the dollar closed above $960, a level not seen in nearly a year and one that held firm even as copper rallied 1.6% in London and Brent crude retreated 1.1%. That the U.S. currency should entrench itself at those levels on a day when the red metal — the country's primary source of foreign exchange — is climbing sharply speaks to structural pressure that goes beyond the tactical post-Fed move. The global dollar index traded flat, suggesting that part of Chile's currency adjustment reflects domestic factors, including an economy that Bci chief economist Sergio Lehmann projects will grow just 0.7% this year before rebounding to 3% in 2027.

That elevated dollar is having direct and already quantifiable consequences on corporate earnings. According to data compiled from the financial statements of the main IPSA companies — excluding banks — the combination of higher inflation and a rising exchange rate cost the private sector $335 billion in the first half: $251.910 billion from the UF effect and $83.001 billion from currency differences. And the third-quarter outlook looks no more benign. Record diesel prices threaten to add another layer of pressure on results, with a direct impact on the index's industrial companies and knock-on effects on the retail sector, where consumer expectations about the persistence of high prices are beginning to weigh on spending decisions.

Against that backdrop of rising costs, the government is weighing a concrete measure to make fuel supply cheaper: adopting the E10 blend, which mixes 10% ethanol into gasoline. According to a Ministry of Energy memorandum, the measure could generate savings of roughly US$107 million per year for the State — a modest but not insignificant figure at a time of fiscal tightness. The initiative ties into a broader debate over the country's energy agenda, which also features the alliance between forestry firms Foresol and Ecomas in the Biobío region to develop green sawdust drying technology for pellet production, reinforcing the biofuel chain in a region that, in parallel, is seeking to reactivate its economy through a newly installed Regional Economic Committee designed to fast-track investments and restore employment.

The jobs crisis is, in any case, the most urgent backdrop. With the unemployment rate at 9.5% — its highest level in five years, according to the May-July quarter — and the first net destruction of jobs since the pandemic, the government has announced a target of 678,000 new formal jobs by 2030. The figure exceeds the 644,000 created during the Boric administration, but economists like Lehmann warn that under the current regulatory framework "reaching an unemployment rate of 6.5% does not look feasible," underscoring the need for greater flexibility, a review of how the 40-hour workweek is being implemented, and progress on hourly contracts. SOFOFA presented its own reactivation agenda, structured around five reforms that include an all-events severance system based on individual accounts and universal daycare with solidarity-based financing, aimed at reducing barriers to female hiring and labor informality.

Investment in digital infrastructure adds another chapter with Spain's Grenergy, which submitted a US$25 million data center project in Polpaico to the SEIA, framed within the National Data Center Plan 2024–2030. The initiative arrives at a moment when technology's social license is an open debate in Chile: according to the ICSOH-UDP survey, 69% of Chileans used artificial intelligence in the last six months, but distrust runs at twice the level of enthusiasm and eight out of ten want the law to guarantee human attention at banks and public services — a tension that Anthropic will have to navigate as it operates its first Claude Impact Lab in Latin America in the country.

Next week, with markets operating normally after the national holiday, attention will focus on three fronts: the behavior of the dollar against a copper price that has retreated from record highs but remains elevated; the evolution of the Fed's hiking cycle and its impact on Chilean fixed income; and the introduction to Congress of the 2027 Budget Bill, whose contents will be the first real test of whether the government's fiscal priorities are compatible with its ambitious employment and reactivation agenda.