LarrainVial Expect CLP to Weaken to 800/USD Within 9 Months

A temporary dovish shift from the central bank, possible tightening from the Fed and chance of falling copper prices are all factors contributing to an assessment by LarrainVial economists in a report.

• If correct in their exchange rate prediction, the central bank would consider suspending its reserve replenishing and expansion program and stop buying dollars (currently at $40million per day).
• Chilean institutions will face uncertainty surrounding the new constitution and possible changes to economic model.
• "We think that institutional uncertainty will remain a fixture in the local political landscape, although the recently held primaries have somewhat allayed the market's worst fears".
• BCCh has "plenty of reasons" to keep raising borrowing costs. They believe the bank will hike the key rate by 25bps at August meeting continuing to at least 4% by end of 2022.
• Their outlook assumes an extension of fiscal stimulus until December, with the aim of avoiding a potential fourth pension fund withdrawal.