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Chile Monetary Policy June 2023

Chile: Central Bank stays put in June

At its 19 June meeting, the board of the Central Bank of Chile (BCCh) decided to leave the monetary policy rate at 11.25% for the fifth straight meeting. Two board members voted to lower rates.

The decision not to hike further was motivated by the notable declines in headline and core inflation observed since March. Moreover, the Bank commented that two-year market inflation expectations had returned to the Central Bank’s 3.0% target. In contrast, it was premature to begin cutting rates given that headline inflation is still close to triple the target.

The Bank’s forward guidance grew more dovish, with the Bank stating that the policy rate “will start a downward process in the short term”. All of our analysts expect monetary easing to begin in Q3. That said, there is a notable discrepancy over the pace of easing, with a 175 basis-point spread among end-2023 policy rate forecasts.

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