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CHILE: HSBC Maintains More Hawkish View On Rate Outlook

CHILE
  • HSBC says that the tone of BCCh’s MPC statement and Q3 IPoM was significantly more dovish than they were expecting. The corridor for the monetary policy rate moved downwards, with the centre best fitted by 25bp rate cuts in the three next meetings in October, December and January, to 4.75%, followed by one 25bp cut per quarter in the remainder of 2025. HSBC says this is 30-40bp below what the consensus was expecting for the 2025 rates trajectory.
  • As well as the cut to the top of its 2024 GDP forecast range to 2.75% from 3.0%, BCCh also now sees a 0.6% negative output gap, instead of the expected 0.4% positive gap. Meanwhile, BCCh expects a more front-loaded adjustment for inflation, peaking in Q125 and then dropping faster through next year. In the IPoM, there was also little reference to upcoming electricity price hikes, which HSBC expects for October 2024 and January 2025.
  • Surprisingly for HSBC, there was no change in the neutral rate estimate range either. Thus, the authorities still see the policy rate converging to 4% by end-2025. HSBC has a more hawkish view, based on a more prolonged impact from electricity prices on inflation. Prior to this week’s meeting, HSBC was expecting a cut to 5.5%, followed by an extended pause through mid-2025 as the authorities assess the impact of electricity price hikes.
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