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CHILE: Itaú Says Discussion Of 50bp Cut Hints At More Easing Ahead

CHILE
EM BulletBulletGlobalEmerging Market NewsRegion
  • Today’s BCCh minutes revealed that the Board discussed cutting the policy rate by 25bp or 50bp in September, and Itaú believes that the discussion of the larger option would likely have come as a surprise to the market, especially considering July’s pause, even if it was swiftly dismissed.
  • The minutes focused on three factors that had unfolded since the July meeting. Firstly, the Board considered the latest signalling from Fed officials that pointed to a larger cycle than previously priced into the June IPoM. Secondly, domestic demand was softer with consumption falling sequentially and non-mining investment weak. Finally, the behaviour of inflation expectations showed that the market had considered the transitory nature of the effect of the increase in electricity prices, with two-year expectations remaining anchored around 3%.
  • Itaú expects the BCCh to cut by 25bp in each of the remaining meetings this year, taking the policy rate to 5.0% by year-end. They see rates reaching 4.5% during 2Q25, with the risks tilted toward further easing.
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  • Today’s BCCh minutes revealed that the Board discussed cutting the policy rate by 25bp or 50bp in September, and Itaú believes that the discussion of the larger option would likely have come as a surprise to the market, especially considering July’s pause, even if it was swiftly dismissed.
  • The minutes focused on three factors that had unfolded since the July meeting. Firstly, the Board considered the latest signalling from Fed officials that pointed to a larger cycle than previously priced into the June IPoM. Secondly, domestic demand was softer with consumption falling sequentially and non-mining investment weak. Finally, the behaviour of inflation expectations showed that the market had considered the transitory nature of the effect of the increase in electricity prices, with two-year expectations remaining anchored around 3%.
  • Itaú expects the BCCh to cut by 25bp in each of the remaining meetings this year, taking the policy rate to 5.0% by year-end. They see rates reaching 4.5% during 2Q25, with the risks tilted toward further easing.