MNI Chile Central Bank Preview - April 2024: Risk of More Moderate Rate Cuts

Executive Summary:

• Large inflation surprises since the last meeting, an increase in inflation expectations and a more cautious Fed stance support the case for a moderation in the pace of rate cuts this month
• Weakness in CLP will also be a consideration, although BCCh commentary suggest that they think the pass-through to inflation has been limited
• Analysts remain divided, with some expecting another 100bp move

Survey data published by the central bank over the last month show that analysts have shifted their expectations towards a 75bp rate cut at next week’s MPC meeting. The BCCh economist survey, published earlier in March, indicated that 53% of respondents expect a 75bp move on April 2nd, while this week’s BCCh traders survey also revealed that market participants expect a 75bp cut to 6.5%. This suggests that a slowdown in the easing pace, from 100bp in January, is the most likely scenario next week. Beyond that, traders expect a further 75bp move in May, followed by 50bp in June, with the policy rate declining to 4.25% in 12 months’ time.

Full preview here (summary of sell-side views to follow next week):

MNIBCChPrevApr24.pdf