Itaú BBA - Preparing for liftoff

Scenario Review - Chile

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Preparing for liftoff

October 4, 2018

Tightening cycle will be gradual, particularly given the still-loose labor market and low underlying inflation


For the full version with all charts and tables, please open the attached pdf file 
 

Weak activity and labor market data at the start of 3Q18 make the activity recovery unclear and casts doubt on the central bank’s view that the output gap is virtually closed.

Some moderation in international volatility has boosted copper prices above the recent lows and favored an appreciation of the Chilean peso (CLP).

Despite the low inflation, the central bank has adopted the view that the time is right to begin to remove monetary stimulus, and a rate hike is likely this month. Given the global and domestic uncertainty, we continue to expect a gradual hiking process (one per quarter), taking the policy rate to 3.75% by the end of 2019. 

 

João Pedro Bumachar
Vittorio Peretti
Miguel Ricaurte


 

For the full version with all charts and tables, please open the attached pdf file 



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