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CHILE: Natixis Raise 2025 Policy Rate Forecast To 4.50%

CHILE
BulletEM BulletEmerging Market News
  • Natixis raise their policy rate forecast for next year from 4.00% due to an upward revision of their Fed call and policy uncertainty from policies under Trump 2.0 administration. They now forecast several pauses in the easing cycle next year due to noise related to Trump 2.0 policies, which could affect Chile through several channels, including lower Chinese growth and the impact on copper from a stronger dollar and reduced demand for EV’s.
  • By 2025, the impact of electricity price increases will dissipate and inflation will begin a process of normalisation towards the target. Natixis still forecasts inflation of around 3.6% y/y in 2025, converging to target in H1 2026. They also see GDP growth falling to potential of around 1.8% y/y in 2025, from 2.4% this year. Their 2026 GDP estimate sits at 1.8%, with inflation at 3.0%, which they see prompting the central bank to resume its easing cycle in 2026, bringing the policy rate to a neutral level of 4.0%.
  • Natixis says that the Camara swap market is assigning a higher probability of a rate pause as early as December, with a terminal rate of 4.50%. The latest BCCh survey shows that analysts expect the key rate to be at 5.0% in 2024 and 4.50% in 2025, with very gradual cuts in 2026 towards a terminal rate of between 4.00% and 4.25%.
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  • Natixis raise their policy rate forecast for next year from 4.00% due to an upward revision of their Fed call and policy uncertainty from policies under Trump 2.0 administration. They now forecast several pauses in the easing cycle next year due to noise related to Trump 2.0 policies, which could affect Chile through several channels, including lower Chinese growth and the impact on copper from a stronger dollar and reduced demand for EV’s.
  • By 2025, the impact of electricity price increases will dissipate and inflation will begin a process of normalisation towards the target. Natixis still forecasts inflation of around 3.6% y/y in 2025, converging to target in H1 2026. They also see GDP growth falling to potential of around 1.8% y/y in 2025, from 2.4% this year. Their 2026 GDP estimate sits at 1.8%, with inflation at 3.0%, which they see prompting the central bank to resume its easing cycle in 2026, bringing the policy rate to a neutral level of 4.0%.
  • Natixis says that the Camara swap market is assigning a higher probability of a rate pause as early as December, with a terminal rate of 4.50%. The latest BCCh survey shows that analysts expect the key rate to be at 5.0% in 2024 and 4.50% in 2025, with very gradual cuts in 2026 towards a terminal rate of between 4.00% and 4.25%.