Fynsa
The Central Bank adjusted its growth and inflation projections in the June IPoM, but the main change was something else: a more balanced assessment of risks that leaves room for a neutral monetary stance.
Between the closing of the June IPoM statistics and its publication, relevant geopolitical events occurred that could alter part of its assumptions. Market reaction and global uncertainty seem to reinforce an already complex context. Even so, the report remains valid.
Monetary policy remains unchanged in a global environment marked by trade tensions. The Central Bank prioritizes prudence while domestic activity and inflation continue to show no clear signs.
The Central Bank adjusts its economic projections, but maintains a cautious approach to global risks that could alter its monetary policy strategy in the coming months.
We project a further 25bp cut at the December meeting, which would end 2024 at 5.0%. As we estimate the neutral rate at 4.25%, three more cuts should occur during the first half of next year, with room for some pauses only if needed due to the economic situation.
The October CPI does not set alarm bells ringing, nor does it change the downward trajectory that inflation has been on for some time now. It is true that the significant increase in electricity tariffs has delayed this process, but we are opposed to thinking that it has diverted it completely.
The Central Bank of Chile has resumed the reduction of interest rates, which has led to a greater relevance of the UF and short-term bonds as conservative investment alternatives.
Local assets continue to offer an attractive risk/return ratio
We maintain our preference for a short duration strategy with high indexation to the UF.
The probability that the process of convergence to inflation will be interrupted or definitely turned around has fallen significantly, but there are still elements of risk to monitor.
