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AUSSIE 10-YEAR TECHS

(Z1) Off Lows, But Remains Weak

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Still Vulnerable

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Bullish Price Sequence

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  • The Chilean central bank surprised markets late Wednesday with a considerably larger rate hike than expected, with the BCCh raising the key rate by 125bps to 2.75%. Markets had seen a more modest 75-100bps hike. The board voted unanimously for the rate rise.
  • This marks the second consecutive meeting at which the bank have tightened policy rates at a faster pace than expected, and puts the bank on track to return policy to a neutral level ahead of their previous forecast of H1 2022 - made just a few weeks ago.
  • In the accompanying policy statement, the bank pointed to the now "notorious" rise in fuel prices, as well as tightening intentions among overseas central banks and a much stronger and systemic deterioration in Chilean financial markets.
  • Another key part of their assessment pointed to inflation expectations, which have accelerated "in all horizons", thereby increasing the risks surrounding the bank's expectation for inflation's convergence to the 3% target.
  • The next Chilean rate decision takes place on December 14th, with the bank also updating their MPR projections for the final time this year.