Chile: Central Bank of Chile leaves rates unchanged in July
At its meeting on 31 July, the Central Bank of Chile decided to maintain the monetary policy interest rate at 5.75%. The move surprised market analysts, who had expected a cut.
The Bank’s desire to stay put was likely driven by a desire to assess the impact of past rate cuts, which have totaled 550 basis points over the last year. Moreover, both headline and core inflation were still above the midpoint of the Bank’s 2.0%-4.0% target range in June, the latest month of available data.
The Central Bank stated that the policy rate should continue to be reduced going forward, while simultaneously indicating that the majority of the rate cuts anticipated for 2024 were already implemented in the first half of the year. Most of our panelists see between 25 and 125 extra basis points of cuts by end-2024, though a few see rates unchanged.
Itaú Unibanco analysts commented on the outlook:
“Facing higher short-term electricity related inflationary pressures and rising inflation expectations, the BCCh is set to assess their impact along with the overall effects of the tranche of cuts on the inflationary and activity outlook. Our yearend policy rate stands at 5.50%.”
Goldman Sachs’ Sergio Armella said:
“We see risks to our near-term policy rate path as skewed toward the possibility of just one, rather than two, cuts over the rest of the year.”