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.
MNI Chile Central Bank Preview - Oct 2022
Executive Summary
- The BCCh is widely expected to continue with its tightening cycle at the October meeting, with the median consensus pointing to a 50BP increase to the overnight rate target from 10.75% to 11.25%.
- Despite the central bank nearing the upper bound of the rates corridor laid out in the latest Monetary Policy Report, inflation readings in August and September have remained high.
- Additionally, a widening current account deficit and renewed CLP weakness amid ongoing political uncertainty would suggest the central bank should re-assert a hawkish posture in order to anchor inflation expectations.
Click to view the full preview: MNI BCCH Preview - October 2022.pdf
Following the September meeting, monthly CPI readings of +1.2% in August and +0.9% in September are evidence of resilient inflationary pressures. This resulted in annual headline CPI reaching 14.1%, before moderating to 13.7%, however, this remains even further above the BCCh target from the last time policy makers decided on rates. Furthermore, in the latest central bank economist survey, published on September 12, the 2022 year-end inflation rate forecast was adjusted to 12.5% versus 12.3% before the September meeting. 2023 year-end forecasts were held at 5.5% but remain well above the central bank’s target. While the economist survey predicted that rates would be hiked to 11.00% at this meeting, the more recent BCCh trader’s survey suggested a 50BP hike as the most likely scenario. It is worth noting that the October economist survey will be released on Wednesday, prior to the decision.
Current Account Deficit Widens, FX Intervention Programs Ends
Chile’s current account deficit is currently in close proximity to the record-wide level of 8.5% of GDP, with analysts noting this imbalance made worse by severely dampened FDI flows over the past year. The ongoing strength of the US dollar compounds the headwinds faced by the Peso. Since the September meeting, USDCLP traded as high as 996.97, a greater than 11% rise from the September 6 close. While the pair has moderated since, the currency no longer has the support from the central bank intervention program which ceased on September 30. Further CLP weakness has the strong potential to re-ignite inflationary pressures and keep expectations de-anchored.
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.