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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI Chile CB Preview - July 2021
Executive Summary
- The Chilean Central Bank are likely to hike the key interest rate by 25bps to 0.75%.
- Following previous signals within the minutes and creeping inflationary pressures, the BCCh are expected to commence a gradual tightening cycle at their July meeting.
- The growth outlook and Covid situation continue to provide optimism relating to activity.
- These factors, combined with lingering political uncertainty and pressure on the currency, support the BCCh reducing the current level of monetary policy stimulus.
Click to view full preview: MNI BCCH Preview - July 2021.pdf
Inflation Edges Higher But Within Target Range
Headline annual inflation continued to climb, reaching 3.8% in June, from 3.65% in May. While the reading inches closer to the upper tolerance band of 4%, it was notably below the 4.1% estimate. Additionally, the central bank's preferred core inflation measure (core excluding volatile items) was 3.25% y/y, down from 3.37% in March. Nevertheless, the central bank raised its year-end headline inflation forecasts to 4.4% in 2021 from 3.0% in the previous monetary policy report, above the ceiling of the 3.0% +/- 1 percentage point target.
Following the data, analysts have debated whether a hike at the July meeting will manifest, however, several other factors may have strengthened the case for the start of policy rate lift-off.
Minutes From June Meeting Suggest High Likelihood Of Hike
By preparing the market for MPR adjustments that "would occur shortly", combined with the explicit discussion of a 25bps hike and continued favourable adjustments to the growth outlook, we believe the BCCh are comfortable with commencing hikes at Wednesday's meeting.
Growth and Covid Reasons For Optimism
May economic activity rebounded above expectations to 2.6% m/m, offsetting negative prints in both March and April, following tighter mobility restrictions amid the second wave of the pandemic. Most recently, the government adjusted their economic growth calculation to 7.5% for 2021, from 6% previously. Recovering activity points to a narrowing output gap and supports expectations for the central bank to reduce accommodation.
Source: MNI/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.