- Itaú believes that the bulk of the BCCh's easing cycle has already unfolded. The latest forward guidance has led them to change their call to one additional 25bp cut, to 5.5%, followed by a prolonged pause (where previously they saw the policy rate reaching 5.25% before the cycle interruption).
- An upcoming supply-side price shock and the subsequent spillover should keep inflation well above the 3% target during the forecast horizon. Itaú expects an even bigger increase in electricity tariffs than previously thought, with the bulk being implemented during 2H24. Their updated electricity view has led to the upward revision of their year-end CPI rate forecasts, to 4.5% for 2024 (up 40bp) and 3.3% for 2025 (up 20bp).
- Expectations of a loosening of global financial conditions ahead, once the Fed initiates the easing cycle, suggest a likely resumption of rate cuts during the latter part of 2025. Itaú sees the policy rate falling to 4.5% next year, the upper bound of the BCCh's nominal neutral range. That said, risks are tilted toward a higher rate path.
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