MNI BCCh Preview - Jan 2021: Chile Seen Holding Rates as Strong Policy Impulse Still Required

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MNI BCCH PrevJan2021.pdf

• State-of-play - At the previous meeting, analysts noted the MPC made a minor tweak to their language, seeing more balanced risks to economic activity, while in previous meetings it saw risks skewed to the downside.
• Following the meeting, however, the December Monetary Policy Report (IPOM) echoed the extremely dovish stance of the central bank. This was highlighted by the bank's projections for a slower closing of the output gap and resulting slower policy rate hiking cycle.
• The IPOM presented a considerable upward revision to the 2021 growth forecast, although this largely reflected base effects from a weaker growth forecast for 2020.

• Developments – Despite November Economic Activity falling below expectations, the 1.1% m/m print exhibited a rebound from the negative reading in October. This brought the annual figure back into positive territory at 0.2% versus the prior reading of -1.2%.
• December CPI improved from 2.7% to 2.97% bringing it almost exactly in line with the target of 3% (+/-1%).