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Itaú Expects BCCh To Remain Cautious, With One Rate Cut In H2

CHILE
  • Following today’s CPI release, Itaú expects headline inflation pressure to continue rising as further electricity price adjustments are expected later this year and in early 2025. They expect inflation to end the year at 4.5%, above the central bank’s 4.2% projection.
  • In July, a key price driver was electricity as generation prices adjusted. Shelter prices also surprised to the upside, while air fares rose sharply. Excluding volatile items, the monthly services gain was a far milder 0.2%. Itaú estimates that inflation accumulated in the quarter was 4.9% (sa, annualised), up from 4.3% in Q1, while core inflation rose to 3.9% (sa, annualised) from 3.0%.
  • In this context, Itaú expects the Board to remain cautious as inflation expectations may continue to rise. Nevertheless, weak activity dynamics in Q2 and consolidating expectations that the Fed should cut rates several times this year may permit additional easing. Itaú sees a year-end policy rate of 5.5%, with one additional 25bp cut to come during H2.
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