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HSBC Raise Year-End Interest Rate Forecast To 5.25%

CHILE
  • In HSBC’s view, the BCCh monetary policy statement opened the door for earlier pauses in the easing cycle. HSBC now see a 25bp cut in July followed by a pause at the September meeting, and another rate cut in October followed by a more extended pause, at 5.25%, until mid-2025. This compares with their previous 5.00% year-end forecast, which they expected to reach by September.
  • The first pause could be motivated by the desire to wait for the Fed to make a move, and the following pause by the need to monitor the impact of electricity price hikes as they will possibly bring inflation above the 4% ceiling of the target.
  • HSBC pencil in 75bp of rate cuts for the remainder of 2025. They think these will be conditioned to a potential reassessment of the neutral rate from the central bank towards the end of 2024. HSBC think the global rates environment could lead to a sizable increase in the median of estimates, which stood at 1.1% (real, over the 3% target) in late-2023.

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