More importantly, short-term inflation measures continue to show signs of calm. So-called inflation rate remains below 3%, indicating that there are no significant inflationary pressures on the horizon. 

The decline in the CPI was mainly due to the drop in fuel prices, supported by a stronger exchange rate and lower oil prices. This was compounded by declines in clothing and the usual seasonal drops in fruit and vegetable prices. 

What does this mean for the interest rate scenario?

This record reinforces our view that inflation could be around or even slightly below the 3% target 3% during January, which opens up space for the Central Bank to continue cutting the Monetary Policy Rate at its March meeting, bringing it closer to a neutral rate of around 4.25%. 

In this context, time deposits continue to lose their appeal compared to fixed-income alternatives fixed-income instruments with longer maturities, which currently offer better entry rates and greater potential. In practice, this means that rates on time deposits will continue to adjust downward.  

Although they remain a valid alternative for those who prioritize security and liquidity, their expected future returns are increasingly lower.  

We continue to observe a market that continues to favoring exposure in UF and durations between 3 and 5 years, a combination that allows for capturing carry and inflation without assuming excessive risk. This is in a scenario where there are no clear upward pressures on medium-term rates and with both nominal and UF rate curves shifting downward but maintaining a positive slope, which continues to generate opportunities in the middle tranches. 

Victor Valenzuela
Cashier