Fynsa
What the figures show is that the Chilean economy is stagnating.
Banks cite a less favorable or more uncertain economic outlook, reduced risk tolerance, deteriorating collateral values, and concerns about funding costs and their liquidity positions.
The Central Bank's constitutional mandate is inflation; therefore, its measures should be aimed at achieving that objective and no other.
Core inflation is leaning in a more comfortable direction, so it would be reasonable to conclude that the Fed could adopt a wait-and-see approach at its next meeting, effectively ending the tightening cycle.
Of concern is what is happening with core inflation, which rose 1.6% in March.
Our biggest question mark is that a soft landing scenario is already largely built into prices and we don't see much reason for risk assets to continue to rise, amid higher rates and still hawkish language from several FOMC members.
Although the Fed is nearing the end of its rate hike cycle, they are still likely to raise the fed funds rate further, given the strength of the labor market, but keeping the pace moderate.
The Central Bank decided to keep the rate at 11.25. The question now is when there will be news on this front.
Higher interest rates put pressure on valuations during 2022, but the focus will now shift from valuations to corporate earnings in an increasingly challenging macro environment.
