Chile's central bank on Tuesday cut its monetary policy rate by 0.25 percentage point to 4.25%.
In a statement, the central bank said that in coming months it may need to add more monetary stimulus to ensure that inflation projections are at 3.0%.
"Future changes in the monetary policy rate will depend, however, on the implications of domestic and foreign macroeconomic conditions on inflation perspectives," it said.
The central bank noted that Chile's economic growth is moderating.
It said a recovery in the growth of Chile's trade partners is expected in coming quarters, and will be led by a recovery in developed nation economies, especially in the U.S.
Economists had widely expected Chile's central bank to cut its rate, pointing to increased evidence of an economic slowdown, especially in a decline in investments.
Inflation, meanwhile, remains under control.
In January consumer prices rose 0.2% from the previous month, with the annual increase at 2.8%.
The central bank said this week that inflation expectations on a two-year horizon remain at about 3.0%, the central bank's target.
The central bank noted Monday that, apart from Tuesday's rate cut, a majority of analysts expect at least one more decline in the monetary policy rate during the first half.
Chile's gross domestic product proxy number shows that the economy expanded by 4.0% last year. Economists expect the economy to expand by 3.8% this year.