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Goldman Sachs See 10.75% Terminal Rate Following BCCh Minutes

CHILE
  • Following the release of yesterday’s BCCh minutes, Goldman Sachs acknowledge that the consideration of a 100bp Hike at the July meeting could be seen as a hawkish development.
  • However, GS highlight that, contrary to the post-meeting statement where “new policy rate hikes will be necessary to ensure the convergence of inflation to 3% in two years”, the minutes exhibit a less direct tone where new policy rate hikes are “quite likely”, which in Goldman’s view is less forceful than the post-meeting statement.
  • In a similar vein, the MPC noted that this policy decision strikes a balance between the heightened inflation pressures and offsetting forces that could weigh on economic activity in the medium-term.
  • All in all, the GS policy rate baseline for the next two meetings (September and October) is for two additional hikes of 50bp apiece to reach a terminal policy rate pf 10.75%.
  • GS expect the MPC to be particularly attentive to signs of a more pronounced FX pass-through, the behavior of inflation expectations, and the calibration of monetary policy by the FOMC and central banks in other core economies.
  • Overall, their policy rate baseline will be adjusted up or down depending on incoming data and the overall tone of the September IPoM.

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