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CHILE: Santander Believe CPI Expectations Trajectory Reduces Hiking Probability

CHILE
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  • Santander believe the latest BCCh minutes show a more restrictive message than the statement, with the discussion reflecting a combination of prudence and determination.
  • While the baseline scenario continues to point to a convergence towards the target on the policy horizon, the committee makes it clear that it will not hesitate to reverse the easing cycle if conditions require it.
  • Santander note that following the meeting and January inflation data, the percentage of EEA respondents in February who believe that two-year inflation will be higher than the target has fallen significantly (32% vs. 42% in Jan), even reaching values ​​below those observed in November.
  • They believe this reduces the probability that the BCCh will consider a rate increase in its baseline scenario and Santander continue to expect that after a prolonged pause, it will make a 25bp cut towards the end of 2025.
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  • Santander believe the latest BCCh minutes show a more restrictive message than the statement, with the discussion reflecting a combination of prudence and determination.
  • While the baseline scenario continues to point to a convergence towards the target on the policy horizon, the committee makes it clear that it will not hesitate to reverse the easing cycle if conditions require it.
  • Santander note that following the meeting and January inflation data, the percentage of EEA respondents in February who believe that two-year inflation will be higher than the target has fallen significantly (32% vs. 42% in Jan), even reaching values ​​below those observed in November.
  • They believe this reduces the probability that the BCCh will consider a rate increase in its baseline scenario and Santander continue to expect that after a prolonged pause, it will make a 25bp cut towards the end of 2025.