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Sell-Side Sees BCCh Nearing Beginning of Easing Cycle

CHILE
  • Itau write that they expect Chile's easing cycle to begin in July and consider a cautious easing pace that results in a year-end rate of 9.25%.
  • Nevertheless, as inflation remains elevated, persistent core inflation leading up to the July policy meeting, could lead to a further delay in rate cuts.
  • Separately, Pantheon writes that the dovish tilt is finally underway. They see policymakers as having finally adopted a modest dovish stance, saying in the IPoM forecast that activity and inflation are behaving as expected, opening the door for rate cuts in Q3.
  • Pantheon expect disinflation will continue to gather speed, thanks to favourable base effects, the impact of increasing real interest rates, and the CLP rebound in recent quarters.
  • But a rate cut as soon as next month is possible, given ex-ante real rates at around 7%, well above the 0.75% neutral rate. Their base case is that interest rates will end the year at around 7%, before falling to about 5% in 2024.
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