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Santander Say IPoM Delivers Strong Message For Monetary Policy

CHILE
  • The central part of the corridor for the Monetary Policy Rate points to a first cut in the MPR of 75bps for September and then two consecutive cuts of 50bps in the October and December meetings, with which the rate would close the year at 9.5%, above the 8% they targeted in the previous Report. Then, during 2024, the rate would continue to drop gradually to close at around 5.5%.
  • Santander note that in general terms, the new projections for activity and total inflation of the Central Bank are quite in line with their estimates and with those of the market, even though the composition of the CPI is different. However, the signal for the Monetary Policy Rate differs from the consensus.
  • If the scenario proposed in the Report were to occur, ex ante one-year real interest rates would rise and could be close to 6%. This level is well above previous all-time highs and does not seem consistent with an economy that, although it is not contracting, is growing at a very low rate and will begin to show slack.
  • For this reason, it gives the impression that the trajectory for the rate presented in the report is based, in part, on a risk management strategy and would fundamentally respond to the fact that the inflationary problem, according to the Central Bank, will not be resolved while the Two-year expectations remain above the 3% target.
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