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Goldman Sachs and JP Morgan Expect BCCh to Begin Easing Rates Following June Inflation Data

CHILE
  • Goldman Sachs highlight that headline inflation has surprised downwards in the last five months, accumulating 50bp to the downside so far this year.
  • However, they note that core services inflation, which tends to be more persistent, is still printing at high levels. Moreover, the core goods deflation observed in June probably benefited from the CLP appreciation observed since the H2-22, though they estimate this pass-through to be soon behind us.
  • Goldman Sachs expect the MPC to cut its policy rate by 50bp in July and September, leading to a year-end policy rate of 8.75%. However, core inflationary pressures remain persistent, which should keep the central bank conservative and the policy rate restrictive for some time.
  • The BCCh Board signalled the start of the easing cycle in the near term, and JP Morgan say today’s June CPI report cements the likelihood of the coming policy meeting to kick off the cycle.
  • Moreover, both headline and core CPI surprised to the downside in June. Therefore, they now see the beginning of the easing cycle with a 75bp cut, followed by back-to-back reductions 75bp cuts in the remaining of the year, so for the policy rate to converge to 8.25% by the year end.
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