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JPMorgan on BCCh: Stance Moves To Data Dependency Mode

CHILE
  • *JPMorgan: Alongside the surprise decision, the Board signalled the policy rate has converged to the ceiling of the base case scenario corridor, to be published tomorrow with the 3Q MPR.
  • Therefore, the Board suggests that, if the base case scenario does transpire, the policy rate at 10.75% would be sufficient to drive inflation expectations lower and thus realized inflation to the 3% target by the policy horizon.
  • To complement the trade-off (raising the policy rate above expectations, but moving into data-dependency mode), the Board highlights it would pay special attention to inflation risks, due to both the elevated levels and de-anchored inflation expectations.
  • In all, and while waiting for the MPR today, JPM characterize the Board’s stance as moving into data dependency mode, and in JPM’s assessment additional tightening is required. They will update their base case for the monetary path tomorrow once the MPR is published.
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