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Itaú Says BCCh Minutes Signal Potential Pause At 5.50%

CHILE
  • Following yesterday’s BCCh minutes, Itaú notes that the fact that some Board members analysed the decision to pause in June is consistent with their view that the Board will tread carefully in the aftermath of the June IPoM’s higher inflation forecasts.
  • In their view, after bringing the one-year ex-ante real rate to 2.55%, closer to neutral (0.5-1.5%), the Board has gained more flexibility for future decisions. Itaú also notes that the BCCh is expected to revise the neutral real rate and other structural parameters in September, with potential for the centre of the neutral real rate range to be revised slightly higher.
  • Itaú currently expects two 25bp cuts to 5.25% this year before BCCh pauses the cycle. However, the signalling from the minutes suggests the pause will take place somewhat earlier, likely at 5.5%, before further cuts unfold in 2025 amid some loosening of global financial conditions and more clarity on second round effects of electricity prices. The evolution of June inflation and inflation expectations from both the analyst and trader surveys will be key in determining whether the Board advances with another 25bp cut this month.

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