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Goldman Sachs Forecasting a 75BP Cut and Balanced Post-Meeting Statement

CHILE
  • Given the tight real policy rate, recent progress in bringing inflation down, and the downward adjustment of inflation expectations, Goldman Sachs expect the MPC to cut its policy rate by 75bps to 10.50%. Goldman see some risks, however, of a more moderate 50bps cut and anticipate a balanced post-meeting statement.
  • Since the last meeting, headline inflation in June printed at a notably low -0.2% mom, below consensus expectations for a +0.1% variation. Core inflation excluding volatile items, the central bank’s preferred measure of inflation, also registered a low print (0.0% mom) extending the breath of the disinflation process beyond the non-core volatile component.
  • Overall, GS expect the MPC to welcome the direction of travel of the economy, noting that inflation has continued to trend downwards, inflation expectations for end-2024 are now at the central bank’s target and the output gap has continued to narrow.
  • Nevertheless, the MPC will probably also acknowledge that inflation remains high, some core inflation components (e.g., core services) remain sticky and as such, the Central Bank will maintain a data dependent approach in its cut, easing to the extent that progress in the disinflationary front allows while keeping policy in restrictive territory.
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