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Scotiabank Say BCCh Verbal Intervention Comes Too Late

CHILE
  • On Monday, the government announced fiscal measures to support households in the face of recent high inflation.
  • For its part, given the recent depreciation of the CLP and its unusual high volatility in recent days, the central bank made a verbal intervention to announce that, if necessary, it will implement measures to ensure the normal functioning of the internal and external payments.
  • Although the central bank pointed out that the external shocks facing the Chilean economy are significant, it recognizes that uncertainty remains high, which, added to the relevant current account deficit and high inflation, makes the economy more sensitive to external shocks.
  • In Scotiabank’s view, this verbal intervention comes too late, following several days of considerable volatility and exchange rate depreciation. Likewise, they anticipate possible direct measures through the sale of US dollars in the spot market in conjunction with micro-macroprudential measures. However, the increased vulnerability of the Chilean economy highlighted by the central bank verbal intervention could lead to a short-lived effect, leaving the market looking for more artillery.
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