Fynsa
During the week, I had the honor of being invited, together with colleagues much more prestigious than myself, to a meeting organized by the Budget Director, Javiera Martinez. On this occasion, together with the macro coordinators of the Dipres and the Treasury, we had the opportunity to have a frank conversation regarding the views on the Chilean and world economy, facing the last part of the year, but especially 2023 and 2024. Beyond the technical doubts raised regarding specific aspects of the budget, the general view of those present (well, virtually present) is that macroeconomic conditions will be extremely challenging in the coming period, particularly in terms of growth and inflation.
The Federal Reserve, at its September meeting, raised the Federal funds rate by 75 bpin line with market expectations. However, the most relevant aspect was not this, but the tightening of the anti-inflationary discourse, in line with what was stated at the Jackson Hole meeting. It is quite clearly stated that the battle against inflation is now and must be fierce, as there is a risk that, by being too lax, the costs to be paid in the future will be higher. Thus, the Council increased its projection for the rate at the end of 2022 by 100 bps compared to the June estimate, by 80 bps for 2023 and by 50 bps towards 2024. In any case, the high dispersion among the Board members is striking, especially for the two-year rate level.
Similarly, our Central Bank increased the TPM by 100 bp at the beginning of the month, which we discussed at the time. However, with the minutes of that meeting in hand, we have more information about the future course that the Issuer may take. Thus, it seems to me that it is now correct to speak of a "pause" in the hiking cycle rather than an end to it, especially because of the inflationary risks hanging over the economy. As the Fed mentions, the future costs of not acting decisively now will be far greater than what we will have to face now.
However, as we mentioned, fighting inflation is not free (well, like nothing else in life). life economy). Growth estimates for the world's largest economy fall dramatically for this year to near stagnation, and for next year a variation of slightly more than 1% is expected. In this part of the world, on the other hand, the most affected has been the projection for 2023, for which the doubts are not related to whether or not we will have a recession, but rather how deep and persistent it will be. Our macro scenario incorporates GDP declines until at least the third quarter of next year, with the first of these occurring precisely in the August Imacec.
Although the global context is adverse, this should not be a consolation for simply accepting a less benign fate for the years ahead. While the Central Bank is doing everything possible to reduce inflation, the work of the public and private sectors must focus on productivity, the only way to generate wealth without boycotting the work of monetary policy. Therefore, improving productive processes, favoring alliances, facilitating trade with the world and minimizing bureaucracy should be at the top of our priorities.
