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Central Bank Expected To Begin Easing Cycle On Friday

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  • On Friday, the BCCh is expected to initiate the easing cycle, having previously hinted at the June meeting that if the disinflation trend were to continue, “the MPR will start a downward process in the short term”. Furthermore, it is worth highlighting that two board members voted for a 50bp cut to the MPR in June.
  • In line with both the central bank economist and trader survey of expectations, the consensus estimate is for the BCCh to cut rates by 75% to 10.50%. However, there are a couple of analysts calling for both a 50bp and a 100bp cut which shows the decision is by no means a foregone conclusion. As a reminder, the latest set of inflation data saw another downside surprise for annual headline inflation to 7.6%, down from a prior reading of 8.7% Y/y.
  • Itaú are one of the banks calling for a smaller-than-expected cut, forecasting a split decision 50bp cut to 10.75%, citing the prior votes as a good indication of easing magnitude. They also believe the BCCh will add guidance signalling gradually larger cuts in upcoming meetings. The full MNI preview with analyst views will be published on Wednesday.

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