Itaú BBA - Evening Edition – Monetary policy decision to be announced tonight in Chile

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Evening Edition – Monetary policy decision to be announced tonight in Chile

July 18, 2019

We expect stable rates at this meeting

Talk of the Day


Today, at 7:00 PM, the central bank will publish the decision of its first monetary policy meeting following the surprise 50bp rate cut to 2.5%. Structural parameter updates provided the board with sufficient justification to lower the policy rate. The board’s working assumption going forward is for stable rates for the coming quarters, before starting a gradual normalization process next year. We expect stable rates at this meeting. Survey results of both analysts and traders also show support for holding the policy rate this month. However, we believe the effects of an unresolved trade war on Chile’s economy would be larger than that outlined in the central bank’s scenario, and this would pave the way for further interest rate cuts later this year (survey results also include more easing ahead).


The government’s first 200 days celebration ceremony happened this afternoon. According to local media, the most expected announcement, regarding the allowance for workers to make withdrawals from FGTS workers’ security savings accounts, was postponed for next week.


Tomorrow’s Agenda: The statistics institute will publish the trade balance for the month of May at 12:00 PM. In the first month of 2Q19, a trade deficit of USD 460 million was recorded, larger than the USD 257 million deficit in April last year. As a result, the trade deficit widened from USD 7.1 billion in 2018 to USD 8.4 billion (USD 8.2 billion as of March). Still elevated capital and intermediate import growth is offsetting mild export gains. As oil exports disappointed and import growth slows gradually, we expect a trade deficit of USD 724 million (USD 600 million last year), leading to a further widening of the rolling 12-month trade deficit to USD 8.5 billion.

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