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CHILE: JP Morgan Now Sees Two Additional 25bp Rate Cuts This Year

CHILE
  • Following the publication of the Q3 monetary policy report, JP Morgan now sees two additional 25bp interest rate cuts in 2024 to 5% (vs. 5.5% previously), while maintaining 4.5% as the terminal rate. Of note, the MPR revisited neutral rate calculations, maintaining it at 4%, with a 3.5-4.5% range. In terms of the rate corridor, the mid-point shows 5.25% by 4Q24 and 4.2% by 4Q25, in line with market pricing post-meeting and post-MPR.
  • Despite their more conservative views on inflation and more optimistic opinion on the state of the economy, BCCh’s dovish shift prompts JPM to close their 2y Camara payers recommendation at a loss (last: 4.57%; PnL: -72bp; entry: 5.37%; target: 6.20%; review: 4.70%).
  • JPM are neutral FX. They expect copper to remain the key factor driving CLP, noting that the correlation to copper has increased in recent months to the highs of the last five years. Meanwhile, low interest rate differentials are likely to remain a source of higher volatility, especially given the currency’s high commodities beta. All in all, offshore positioning now looks neutral and JPM see no big dislocations in terms of valuations, meaning they prefer to stay on the sidelines.
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