(Bloomberg) -- Chile’s central bank President Rosanna Costa said plans to extend one of the world’s biggest rate-cutting cycles remain intact as policymakers have already incorporated new global risks into their outlook.

The bank’s message is that borrowing costs will fall further and the size of cuts will be decided each meeting, Rosanna Costa said in an interview on Saturday during the International Monetary Fund’s Spring meetings in Washington. The institution’s projections are cautious and already consider threats including higher transportation costs and US rate cuts beginning only toward end-2024.

“Consequently, we are within our range,” Costa said. “When we deliver our message, we indicate a range of movements that we can use to determine if the base outlook hasn’t changed. If there are relatively small changes, then you can think that you’re still in range.”

Policymakers led by Costa — the first female central bank chief in Chile’s history — are extending their easing cycle though at a more gradual pace after upside inflation and activity surprises this year. The monetary authority has lowered borrowing costs 475 basis points in total since July, to 6.5%. Still, they recently signaled that it will take longer for inflation to hit the 3% target.

Chile-watchers are paying close attention to price pressures from a weaker peso, which has declined 8% against the dollar this year. A depreciated currency raises the cost of imports, and Chile is especially vulnerable given it’s a relatively small and open economy that imports the majority of its fuels.

While a further rise in transportation costs stemming from Middle East tensions is a possibility, it is not a “central element,” Costa said. Furthermore, the current situation fails to put an upward bias on the bank’s inflation forecasts.

“The right thing to do is to be alert,” Costa said. “Until now, there hasn’t been an escalation. We are still within the outlook for our projections.”

Costa reiterated that Chile is better-positioned to confront external shocks now than in the past and that decisions on future rate cuts will be cautious, taking into account macroeconomic developments.

“Our economy requires that interest rates continue to fall,” she said. “That will happen at a speed that we decide meeting-by-meeting.”

Chile’s consumer prices have surprised markets since the start of the year. After blowing past analyst expectations in both January and February, monthly inflation came in less than all forecasts in March.

Meanwhile, economic activity has posted broad-based gains since the start of the year, according to the central bank’s proxy for gross domestic product. 

Put together, this month central bankers raised their 2024 year-end inflation forecast to 3.8% from 2.9%.

Both economists and traders surveyed by the monetary authority now expect policymakers to slow the pace of easing at the second straight meeting in May, delivering a half-point cut. That decline would follow April’s reduction of 75 basis points and January’s drop of 100 basis points.

Read more: Latin America Sees Low-Rate Dreams Crumble, Political Woes Rise

Chile is far from the only Latin American country to temper investors’ rate-cut expectations. Brazil central bank chief Roberto Campos Neto has underscored that uncertainties have risen and laid out a scenario that would lead to slower easing, while Colombia’s Leonardo Villar said this month the plan is to lower borrowing costs without triggering destabilizing capital outflows.

(Updates with additional comments from central bank chief in paragraphs 8 and 9.)

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