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Scotiabank Calling For 50BP Cut, Itaú Don’t Rule Out Larger December Move

CHILE
  • Scotiabank: Today’s surprising inflation reading leaves Scotiabank’s and the BCCh’s short-term inflationary scenario in doubt. Thus, Scotiabank see it as more likely that recent economic figures will lead the BCCh to cut the benchmark rate again, but by only 50 bps. The labour market continues to weaken, activity shows stabilization with favourable supply momentum—but not demand—credit remains muted, but now inflation is receding slower than expected due to this November CPI that receives a strong impulse from tradable goods. Only the persistence of the recent CLP appreciation and confirmation of a negative December CPI could lead the BCCh to increase the size of cuts at January’s meeting.
  • Itaú: The November print will likely result in a slower inflation convergence path than Itaú had anticipated (4.1% year-end), but not too dissimilar from the BCCh’s call of 4.3%. The less favourable November CPI print may bolster views to persist with the 50bp rate cut pace. However, the loosening of global financial conditions and the appreciation of the CLP since the October meeting, along with inflation expectations that are anchored or slightly below the target means a larger cut cannot be ruled out given the highly contractionary level of the one-year ex-ante real rate (5.4%).
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