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Santander Expect Easing Cycle To Begin In April

CHILE
  • The dilemma facing the Board is that it may take time to be absolutely certain that inflation is unequivocally on target within the horizon. In the meantime, real interest rates will be rising and the economy is highly likely to be in recession. In this context, delaying the necessary monetary adjustment for the new phase of the cycle can be very costly. For this reason, the monetary authority will have to run certain risks when starting the process of cuts.
  • By the next meeting, the board will have information on the CPIs for Jan and Feb, and the Imacec for Dec, Jan & Feb. In the case of CPI, it is possible that the figure for January will continue to be relatively high. In part, due to some one-time effects associated with the application of VAT to a series of services. In February, prices will show a very limited advance. On the Imacec side, the next numbers will confirm that the economy is very weak and that capacity gaps continue to widen.
  • If we add to this the effects of the strong appreciation of the peso, the Board should have enough arguments to initiate the cuts at the next meeting, as Santander and a large part of the market expect.
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