July 28, 2022 11:40 GMT
- As a reminder, at the July 13 meeting, the BCCh Board decided to raise the monetary policy interest rate by 75bp to 9.75% in a unanimous vote. This was above the modal forecast within the Bloomberg survey and was against prior guidance that the hiking pace would decelerate from the previous meeting. However, recent developments regarding inflation and the weaker CLP had prompted several analysts to revise their forecasts to more hawkish predictions.
- Goldman Sachs expect the minutes to show that the directors remain concerned about the persistence of inflation and the behavior of inflation expectations within the relevant policy horizon.
- Furthermore, GS expect to see concerns that a more pronounced pass-through following the strong depreciation of the CLP would weigh on domestic prices, exacerbating the already challenging inflation dynamics. GS highlight that any potential discussion and evaluation in the minutes regarding intervention in the FX market was likely superseded by the FX market intervention program announced on June 14.
- They also expect the Committee to recognize the complex macroeconomic environment and the high degree of domestic and global uncertainty.
- GS will be particularly attentive to any discussion on the path for the policy rate, and what developments prompted the MPC to revise their previous guidance on the magnitude of future policy rate hikes. Additionally, they will be looking for the following:
- Discussion about whether a larger pass-through could lead to a feedback cycle of currency depreciation and rising inflation, thereby rendering inflation more persistent.
- Discussion on wage growth dynamics and the risk of intensifying cost-push pressures on inflation.
- Importance of the FOMC and core central banks expected policy rate path for the calibration of the domestic policy rate.