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Barclays Believe BCCh More Likely To Maintain 100bp Rate Cut Pace

CHILE
  • Barclays recently argued that an acceleration of the pace of cuts was unlikely, and that instead the BCCh would likely be forced to slow the pace of cuts in coming meetings, given domestic and external macro dynamics since the January meeting.
  • Nonetheless, the BCCh has taken a much more dovish stance since the January meeting, and it seems to have strengthened lately. In this context, the BCCh seems more likely to keep cutting at the previous 100bp pace than slowing down to 75bp in the April meeting, in their view. However, Barclays still see the balance of risks tilted towards a slowdown.
  • Barclays remain of the view that eventually the BCCh will have to slow the pace of cuts and continue to expect the policy rate to remain above terminal throughout 2024. They now project the policy rate at 4.50% in December, vs. 4.75% before.
  • If, instead, the BCCh pushes ahead with a more dovish stance, taking the policy rate to 4.00% by mid-year, the most likely path forward, in Barclays’ view, would be for the policy rate to be hiked later, reaching 4.5-5.0% in 2025.
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