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Central Bank Review: Analyst Views

CHILE
  • Goldman Sachs – BCCh's slightly hawkish twist is consistent with their recent revised call. They continue to expect 75-bps of hikes to 1.25% by year end and another 125-bps by end 2022.
  • Overall, favourable external conditions, progress on the vaccination campaign, and better than expected growth in 2020 has enhanced the outlook for real GDP growth in 2021. However, the MPC remains cautious of the risks to this outlook and considers it prudent to maintain its accommodative stance for the following months (for the recovery to consolidate and disseminate to a number of lagging sectors).

  • JPMorgan – The forward guidance tweak is a first signal of a gradual and shallow tightening cycle, commencing faster than previously entertained. They are assuming that 'several' imply less than seven quarters.
  • In their base case scenario they have the MPC starting a very gradual normalization in 4Q21, which is predicated on the output gap closure post a COVID-19 recovery amid lower potential growth and the consumption impulse stemming from both the (amplified) structural fiscal impulse and pension fund withdrawals.
  • They expect headline inflation to hover at 4% between June and August, which should weigh on the central bank's reaction function despite the communication efforts to focus on CPI ex-volatiles. Expect the policy rate at 0.75% by year end, and also believe the CBC should weigh the merits of moving the policy rate in smaller steps than 25bp.
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