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BCCh Ready To Begin The Cutting Cycle in July With 50BP Cut

CHILE
  • Goldman Sachs believe the Chilean economy is on the right track. Inflation has continued to decrease, and the dynamism of economic activity has remained below potential. Inflation, however, is still high, and the output gap remains positive. Macro rebalancing takes time and the outlook has changed little. As such, monetary policy should remain tight for an extended period.
  • Goldman Sachs expect the Central Bank to maintain a data-dependent approach as they embark on a cutting cycle. The MPC will ease as progress on the disinflation front allows, keeping policy in restrictive/above-neutral territory.
  • Acknowledging more dovish winds, GS now expect the MPC to cut its policy rate by 50bp in July and do the same in September (compared to their previous expectation of no cut in July and a 75bp cut in September).
  • As a result, GS expect the policy rate to end the year at 8.75% compared to their previous forecast of 9.0%. Their forecast for the policy rate by the end of 2024 remains unchanged at 5.5%.
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