FREELAND: CANADA WON'T ESCALATE OR BACK DOWN ON US TRADE FIGHT

MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI BRIEF: China Nov M1 Decline Narrows, M2 Slows

EZ/UK T-Bill Calendar: 8/13/28/50-Week BTF Auction on Monday

EZ/UK Bond Supply Calendar: 4.125% Jul-29 Gilt Due on Tuesday

MNI: CANADA OCT WHOLESALE SALES +3.3%; EX-AUTOS +0.5%

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

CHILE: Itaú Expects BCCh To Continue Cutting To 4.5% In H125

CHILE
EM BulletBulletGlobalEmerging Market NewsRegion
  • Despite the increase in one-year inflation expectations, amidst large electricity price hikes, expectations in the relevant two-year horizon remain anchored at the 3.0% target. In this context and considering the weakness in domestic activity and an imminent Fed easing cycle, Itaú expects 25bp rate cuts at the remaining two meetings of the year, which would take the policy rate to 5%. They see rates reaching 4.5%, the upper bound of the neutral range, during 1H25, with the risks tilted toward additional cuts next year.
  • The surprisingly large rebound in the monthly GDP proxy in July refutes the downside bias Itaú had held on their 2.5% 2024 GDP growth call. They still see growth slowing to a near-potential 2.1% next year. On inflation, they maintain their 4.5% year-end forecast, but risks remain tilted to the upside. Next year, they see inflation converging to 3.3% by year-end, supported by a stronger CLP (to 850 per dollar), lower oil prices and soft domestic demand.
  • Itaú says that the transitory nature of the supply shock is key to permitting the continuation of the rate-cutting cycle. Pauses could take place if a scenario of global risk aversion is reflected in excess exchange-rate volatility. Itaú says that low interest-rate differentials with the US set a high bar for the BCCh to implement a large reserve accumulation program in the near term.
223 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • Despite the increase in one-year inflation expectations, amidst large electricity price hikes, expectations in the relevant two-year horizon remain anchored at the 3.0% target. In this context and considering the weakness in domestic activity and an imminent Fed easing cycle, Itaú expects 25bp rate cuts at the remaining two meetings of the year, which would take the policy rate to 5%. They see rates reaching 4.5%, the upper bound of the neutral range, during 1H25, with the risks tilted toward additional cuts next year.
  • The surprisingly large rebound in the monthly GDP proxy in July refutes the downside bias Itaú had held on their 2.5% 2024 GDP growth call. They still see growth slowing to a near-potential 2.1% next year. On inflation, they maintain their 4.5% year-end forecast, but risks remain tilted to the upside. Next year, they see inflation converging to 3.3% by year-end, supported by a stronger CLP (to 850 per dollar), lower oil prices and soft domestic demand.
  • Itaú says that the transitory nature of the supply shock is key to permitting the continuation of the rate-cutting cycle. Pauses could take place if a scenario of global risk aversion is reflected in excess exchange-rate volatility. Itaú says that low interest-rate differentials with the US set a high bar for the BCCh to implement a large reserve accumulation program in the near term.