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HSBC Expect 50bp BCCh Rate Cut Next Week

CHILE
  • HSBC forecast a 50bp interest rate cut to 5.5% at next week’s MPC meeting before the central bank moves to a 25bp pace. Market expectations are split between maintaining 50bp and slowing to 25bp. HSBC expect the policy rate to reach 5.0% in September, before authorities pause the easing cycle. They expect the BCCh to reassess its estimates for the neutral policy rate towards the end of 2024 and conclude that it is now close to that level.
  • HSBC note that May CPI came in line with expectations but with a broad-based increase of inflation in annual terms. Underlying measures remained stable, while the central bank's measure of headline inflation, which is used for monetary policy purposes, only moderated marginally, to 3.4% y/y. HSBC expect inflation to hover around the ceiling of the 2-4% target range for the remainder of 2024, ending the year at 3.8%.
  • The BCCh will also publish its latest monetary policy report next week, with HSBC noting the main change in the macro scenario since the last report being the rise of copper prices and strengthening of CLP. HSBC say that while disinflationary at first, an improvement in the terms of trade and strengthening of CLP could support a faster expansion of the economy and lead to inflationary pressures in the medium term.
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