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CHILE: Bank of America Expecting BCCh to Cut in September

CHILE
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  • According to Bank of America, the Chilean central bank’s easing cycle pause comes despite the statement recognising several dovish shocks since June's IPOM. These include slower activity, lower ex-volatile inflation and lower global inflation and rates. It is worth noting though that the forward guidance doesn't rule out another cut this year. 
  • Possibly, BCCh is assessing second-round effects of electricity prices hikes and other risks. Retail sales came above expected in June and outlook for large investments improved. The weaker CLP may also have been a factor of caution amid lower copper prices.
  • BofA expect another 25bp cut in September to 5.5% amid slower activity, inflation normalisation in August and anticipated Fed easing. They also forecast the rate to end the year at this 5.5% level. 
  • BofA forecast further cuts next year to a 4.75% terminal rate by 3Q25 (vs 4.25% BCCh). They note a hard-landing scenario in the US would add downward risks to their forecast as the Fed cycle should be a key factor in BCCh decisions.
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  • According to Bank of America, the Chilean central bank’s easing cycle pause comes despite the statement recognising several dovish shocks since June's IPOM. These include slower activity, lower ex-volatile inflation and lower global inflation and rates. It is worth noting though that the forward guidance doesn't rule out another cut this year. 
  • Possibly, BCCh is assessing second-round effects of electricity prices hikes and other risks. Retail sales came above expected in June and outlook for large investments improved. The weaker CLP may also have been a factor of caution amid lower copper prices.
  • BofA expect another 25bp cut in September to 5.5% amid slower activity, inflation normalisation in August and anticipated Fed easing. They also forecast the rate to end the year at this 5.5% level. 
  • BofA forecast further cuts next year to a 4.75% terminal rate by 3Q25 (vs 4.25% BCCh). They note a hard-landing scenario in the US would add downward risks to their forecast as the Fed cycle should be a key factor in BCCh decisions.