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Goldman Sachs On Upcoming BCCh Minutes

CHILE
  • In the post-meeting statement, the MPC stated that the risks of an inflationary scenario have intensified and pointed out that the decision to increase the policy rate to 8.25% places it around the upper limit of the policy rate corridor of the March IPoM. In addition, the MPC highlighted that a new evaluation of the policy rate path would be made in the next IPoM. Goldman Sachs read these observations as a hawkish signal that the central bank is abandoning its dovish forward guidance, which they now view as outdated.
  • In the minutes, GS will look for a possible discussion of the pros and cons that led the MPC to deviate from the baseline path outlined in the IPoM and deliver an above-consensus hike. They expect the MPC to have noted (i) the higher than expected inflation prints; (ii) the complex outlook for inflation; (iii) the deterioration of inflation expectations; and (iv) the more robust than anticipated economic activity momentum given that households' consumption has remained somewhat resilient.
  • GS will look for a possible discussion on the future trajectory for the policy rate, including how deep the MPC expects to drive the policy rate into restrictive territory (i.e., the desired level for the terminal rate in this cycle).
  • GS also expect the Committee to recognize the complex macroeconomic environment and the high degree of uncertainty. Therefore, they expect to see a discussion on the set of conditions that would prompt the MPC to adopt a more or less restrictive monetary policy stance.
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