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Goldman Raise Rate Forecast Despite President Marcel Rhetoric

CHILE

Released on Friday – Goldman Sachs revised their Chile central bank rate forecast higher. They believe the BCCh will lift its interest rate 75 bps to 1.25% by December and then to 2.5% by the end of 2022.

  • They cite Covid-19 vaccination success, more favourable global economic conditions and effects of monetary and fiscal stimulus will lead to faster and stronger recovery than expected.

This comes in slight contradiction to Central bank's president Mario Marcel pledging last week that he would keep a "very expansionary monetary policy" in place to counteract the wide output gap as the country announces fresh restriction and Jan. economic activity came in below expectations.

  • BBVA believe this should lead to a steeper swap curve with the short end outperforming as the market cools its expectation of policy rate hikes. The long end will continue to face upward pressure from U.S. Treasury yields and high copper prices, a strategist noted.

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