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JPMorgan Following The IPoM Release, Maintain 50BP Cut In July

CHILE
  • JPMorgan noted that the revision lower of headline and core CPI ahead and the fact that convergence to target was brought forward by a quarter aligns with the precondition the Board set a quarter ago to start easing monetary conditions.
  • On forward guidance, the corridor range for the policy rate is set at 9.6% (floor) to 11.2% (ceiling) for 3Q23 and 7.8% to 10.6% for 4Q23. For 4Q24, the corridor floor is set at 3.7%-6.7%.
  • JPMorgan’s base case ahead assumes the policy rate pretty close to the forward guidance corridor floor. While waiting for more information to fine-tune the forecast (most relevant the June CPI print), JPM maintain the 50bp cut for the July meeting (risk is for 75bp). That would be followed by 75bp and 100bp cuts in the October and December meetings.
  • For 2024, given the current (maybe sanguine) baseline for the global economy in terms of output dynamics, the forecast policy rate level is trimmed to 4.25% by end 2024, with the cycle terminal rate now sitting at 4.0%. More global growth deceleration than currently forecast would open the door to lower nominal rates.
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