October 15, 2024 16:51 GMT
MNI BCCh Preview – Oct 2024: Consensus Expecting 25bp Cut
The slowdown in economic activity and well anchored inflation expectations support a further 25bp cut to 5.25%.
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Executive Summary
- Most analysts have settled in the belief that the recent slowdown in economic activity and well anchored inflation expectations support the continuation of the easing cycle in Chile, with the majority of forecasters predicting a 25bp cut to 5.25% on Thursday.
- In September, the monetary policy committee said that the policy rate would be reduced to its neutral level more quickly than previously thought, and recent survey data suggest that further gradual cuts over the coming meetings are widely expected.
- However, owing to the early initiation of the monetary easing cycle, expectations are for greater caution in 2025 in order to gauge progress on prices and external developments affecting the economy.
Click to view the full preview: MNI BCCh Preview - Oct 2024.pdf
Shortly after the 25bp policy rate cut last month, BCCh President Rosanna Costa said that the central bank believes that inflation will slow from a peak more quickly next year than previously expected. Inflation is expected to peak in early 2025, before returning to target in early 2026, although the strength of domestic demand could affect the pace of that slowdown. Costa said that she still sees the neutral interest rate in a 3.5-4.5% range and expects the policy rate to enter that range around Q2 next year, implying that the policy rate remains well inside restrictive territory for now.
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