Chile Preview: Central Bank Poised for a Dovish Rate Hold

• It is expected that the central bank will maintain interest rates at 1.75%. Lower-than-expected inflation and weaker-than-anticipated growth since the December monetary policy gathering suggest policy makers sound a more dovish tone.
• Inflation and inflation expectations are in line with the target. They are below central bank forecasts and suggest the impact from protests could be less than policy makers feared.
• Economic growth is lower than central bank estimates and consistent with increasing slack. Residual headwinds from the protests and increasing uncertainty about the external and domestic economic outlooks are downside risks.
• Interest rates are low and already providing significant stimulus. Higher public-sector spending reduces pressure on the central bank to continue cutting rates.

 

(Source: Bloomberg)