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BCCh Can Look Through Weak March Activity Due To Calendar Effects

CHILE
  • The 0.7% monthly decline in the IMACEC economic activity index in March reflected declines of in both the mining (-1.34% m/m) and non-mining (-0.55%) sectors. This was partly due to working day effects because of the Easter holidays. Despite this, economic activity for the quarter rose 2.04% q/q, the strongest since Q421.
  • Itaú note that if activity remains at the Q1 level for the remainder of the year, the economy would grow by 2.3%. They expect the monthly GDP proxy to snap back in April, supported by a reversion of the calendar effects, and forecast GDP growth of 2.4% this year. They expect BCCh to continue cutting ahead, but to further reduce the pace given upside inflation pressures and the fact that the cycle is nearing Fed levels.
  • Deutsche Bank think that the BCCh can look through the apparent setback of activityin March, given the calendar effects, and focus on broader trends, which at the margin have been easing the urgency to loosen policy. They expect BCCh to slow the pace of rate cuts to 50bp in May and 25bp in June.
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