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CHILE: Scotiabank Expect 25bp Cut, But With Cautious Messaging

CHILE
EM BulletBulletGlobalEmerging Market NewsRegion
  • Scotiabank expects a further 25bp cut in the overnight rate on Thursday. However, two sources of risk lead them to expect a more cautious message in the statement that could be interpreted as an eventual pause in the December meeting.
  • On the one hand, there are less benign external conditions stemming from geopolitical risks and inflation in the US in an economy that has not yet shown clear signs of a decrease in excess demand. Indeed, the rise in oil prices together with a possible escalation of the war situation in the Middle East are elements that advise caution. On the other hand, there are the GDP and inflation figures, together with the derivative for domestic demand of a fiscal budget that would expand close to 4% in real terms by 2025.
  • As such, a 25bp cut this week could be accompanied with a conservative and cautious bias from policymakers that would have an upward impact on market rates. Scotiabank expects that the market reading will lead to put in check a further rate cut in December, even though it could still materialise in the event of a rapid easing of the geopolitical situation, an appreciation of the CLP and moderate inflationary records in October and November.
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  • Scotiabank expects a further 25bp cut in the overnight rate on Thursday. However, two sources of risk lead them to expect a more cautious message in the statement that could be interpreted as an eventual pause in the December meeting.
  • On the one hand, there are less benign external conditions stemming from geopolitical risks and inflation in the US in an economy that has not yet shown clear signs of a decrease in excess demand. Indeed, the rise in oil prices together with a possible escalation of the war situation in the Middle East are elements that advise caution. On the other hand, there are the GDP and inflation figures, together with the derivative for domestic demand of a fiscal budget that would expand close to 4% in real terms by 2025.
  • As such, a 25bp cut this week could be accompanied with a conservative and cautious bias from policymakers that would have an upward impact on market rates. Scotiabank expects that the market reading will lead to put in check a further rate cut in December, even though it could still materialise in the event of a rapid easing of the geopolitical situation, an appreciation of the CLP and moderate inflationary records in October and November.