Itaú BBA - Stable rates in Chile, for now

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Stable rates in Chile, for now

July 19, 2019

Looking forward, we expect the policy rate to reach 2.0% by yearend, with the next cut likely in September. 

Talk of the Day


Following the surprise 50-bp rate cut last month, the board of the Chilean central bank opted to hold the policy rate at 2.5%, in line with market expectations. However, the decision was not unanimous, with Pablo Garcia voting for a 25-bp rate cut. It was the first split decision since August 2017, when the same board member voted to continue with rate cuts after the central bank had implemented a 100-bp cycle to 2.5%. Meanwhile, the press release announcing the decision moved from a neutral tone to a dovish bias. The board states that since the 2Q19 Inflation Report (released on June 10), risks to the convergence of inflation to the target have increased. Particularly, it highlighted the slowdown of inflation measures closely reflecting economic slack and the growth r ecovery risk given the uncertain global context. The board noted that if these tendencies persist, additional monetary stimulus would be required.

Looking forward, we expect the policy rate to reach 2.0% by yearend, with the next cut likely in September. Global uncertainty, weak private sentiment and contained copper prices would limit the activity recovery in 2H19. Hence, we believe the output gap would not narrow in line with the central bank’s 2Q19 baseline scenario, keeping inflationary pressures contained and providing room for additional stimulus. ** Full story here.


The government’s first 200 days celebration ceremony happened yesterday. 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.


Day Ahead: The statistics institute will publish the trade balance for the month of May at 12:00 PM. 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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