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JP Morgan Expect Easing Pace To Decelerate Further

CHILE
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  • JP Morgan maintain their call for the monetary easing pace to decelerate further, with the central bank of Chile trimming the policy rate by 50bp this week, to 6.0%.
  • Despite the recent strength of the currency, driven by copper, JPM believe the monetary authority will remain mindful of the potential impact of the narrower interest rate differential amid a shallower domestic capital market and tighter external monetary conditions than those prevailing earlier this year. In fact, the currency weakness observed through April forced the hand of the central bank in abandoning the idea of the policy rate converging to the neutral level this year.
  • Regarding fundamentals, both headline and ex-mining activity saw a very good quarter in 1Q24. Meanwhile, core services CPI inflation continues to prove persistent. Despite core services declining by 0.2% m/m (sa) in April, the last 3-month average printed at a still very high 6.5%(ar), and 5.5% y/y.
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  • JP Morgan maintain their call for the monetary easing pace to decelerate further, with the central bank of Chile trimming the policy rate by 50bp this week, to 6.0%.
  • Despite the recent strength of the currency, driven by copper, JPM believe the monetary authority will remain mindful of the potential impact of the narrower interest rate differential amid a shallower domestic capital market and tighter external monetary conditions than those prevailing earlier this year. In fact, the currency weakness observed through April forced the hand of the central bank in abandoning the idea of the policy rate converging to the neutral level this year.
  • Regarding fundamentals, both headline and ex-mining activity saw a very good quarter in 1Q24. Meanwhile, core services CPI inflation continues to prove persistent. Despite core services declining by 0.2% m/m (sa) in April, the last 3-month average printed at a still very high 6.5%(ar), and 5.5% y/y.