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CIBC Sees Risks Skewed Towards Faster Pace Of Rate Cuts Into H2 Than Priced

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  • CIBC note that the outperformance of the Chilean peso since the start of the month has been driven by the surge in copper prices and less dovish tone of the latest BCCh rate announcement.
  • Although the central bank suggested an adjustment to the pace of rate cuts this year, CIBC caution that the Bank’s forward guidance has quickly changed in the past driven by swift moves in USDCLP and single data releases.
  • CIBC believes that as the CLP appreciates, risks are skewed towards a faster pace of rate cuts into H2 than currently priced in. They note that the market is only anticipating 166bp in rate cuts for the next two years, well below the 250bp needed if the overnight rate were to return to neutral during that period, as expected by the central bank.
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  • CIBC note that the outperformance of the Chilean peso since the start of the month has been driven by the surge in copper prices and less dovish tone of the latest BCCh rate announcement.
  • Although the central bank suggested an adjustment to the pace of rate cuts this year, CIBC caution that the Bank’s forward guidance has quickly changed in the past driven by swift moves in USDCLP and single data releases.
  • CIBC believes that as the CLP appreciates, risks are skewed towards a faster pace of rate cuts into H2 than currently priced in. They note that the market is only anticipating 166bp in rate cuts for the next two years, well below the 250bp needed if the overnight rate were to return to neutral during that period, as expected by the central bank.