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BNP Paribas Do Not Rule Out A Split Decision At This Meeting

CHILE
  • BNP expect the BCCh to keep its policy rate unchanged at 11.25%. In their view, the BCCh will open the door for rate cuts in Q3 2023. In fact, they don’t rule out a split decision, with one vote to reduce the policy rate at this meeting.
  • BNP think an easing cycle could begin in Q3 2023 (base case is July, but acknowledge a close call between July and September).
  • They see cumulative easing of 200bp in Q4 2023, given they expect a clearer divergence between core inflation and the BCCh’s forecasts.
  • Moreover, 1-year ahead inflation expectations will likely be below 4% by then (currently at 4.0%) on BNP’s estimates, which would imply an ex-ante real policy rate of almost 7%. BNP forecast a policy rate of 8% by end-2023, 50bp below consensus.
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