MNI Chile Central Bank Preview - Sep 2024: BCCh Expected to Resume Easing
The BCCh is widely expected to resume its easing cycle at the September meeting, cutting the reference rate by 25bps to 5.50%.
Executive Summary
- Following an unchanged decision in July, both central bank surveys of economists and traders lean towards the BCCh resuming the easing cycle this week, cutting the policy rate by 25bp to 5.50%.
- Although softer-than-expected economic activity data supports this thesis, the uptick for both inflation and inflation expectations should leave the option to prolong the easing cycle pause on the table, reflected by some analysts within the Bloomberg survey expecting an unchanged decision.
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MNI Chile Central Bank Preview - Sep 2024.pdf
Central Bank Surveys Lean Towards 25bp Rate Cut in September
The minutes to the July monetary policy meeting, when the central bank paused its easing cycle at 5.75%, revealed that policymakers were concerned about rising short-term inflation forecasts which required a more cautious stance. In particular, they said that a rate cut in July would limit their leeway for the rest of the year. Despite this, the board kept open the possibility of further rate cuts ahead, noting that the central scenario foresees that the MPR will continue to be reduced throughout the monetary policy horizon, at a pace dependent on the evolution of the data.
Since the July meeting, the incoming data have shown an upward surprise in CPI inflation, driven by electricity price hikes, while Q2 GDP growth slowed as expected. More recently, July unemployment data were weaker than expected, with the unemployment rate rising for the first time since March. The mixed data thus suggest that this week’s MPC meeting could be another close call, with arguments for both extending the pause or renewing the easing cycle. Latest central bank survey data, however, suggest that analysts lean towards renewed easing, with both the economist and traders’ surveys pointing to a 25bp cut in September, followed by a further 25bp move in December.