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Santander Expect Continued BCCh Easing At Aggressive Pace

CHILE
  • Beyond the short-term volatility in rates following the July surprise from the BCCh, there is full consensus that the Board will continue with a process of aggressive rate cuts. Given the state of the economy, the rapid convergence of inflation and well-anchored expectations, Santander believe that there could be room to continue with 100bp declines in each of the following meetings until the end of the year.
  • However, tactical and risk management considerations could make September's cut less intense, at 75 basis points. Although the Council has stated in various instances that its focus is on inflation and that exchange rate movements are not relevant per se , there is evidence that part of the recent depreciation of the currency is due to an overreaction of the markets.
  • For the same reason, in order for them to adjust to the new monetary conditions and avoid unwanted effects, it is possible that the rate of cuts should be moderated temporarily. Then, in October and December, the reductions of 100 base points could be resumed, to end the year with the TPM at 7.5%.
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