13 Feb 2015
Bank of Chile on hold, CLP aims lower – TDS
FXStreet (Edinburgh) - The Emerging Markets Team at TD Securities assessed the recent decision by the Bank of Chile of leaving the benchmark rate unchanged at 3.0%.
Key Quotes
“The Board also pointed out that current growth appears to be in line with December’s Monetary Policy Report’s baseline scenario. Furthermore, medium-term inflation expectations remain anchored around 3%, despite the January inflation surprise which was primarily driven by the core measure”.
“With a persistently weak growth environment, combined with well-anchored inflation expectations, we continue to expect the BCCh to keep rates on hold for the duration of 2015”.
“Given the poor growth outlook (we expect growth of just 2.2% in 2016), we recognize that the risk to our call would be the potential for further easing. However, given the expectations that the Fed will begin to raise rates in the second half of the year, we believe this would be a deterrent to further easing by the BCCh, even in light of disappointing growth”.
“The very weak growth outlook, and continued pressure on copper prices, underpin our core view that CLP will weaken further. With USD/CLP currently trading at 627, we anticipate further depreciation, and forecast USD/CLP ending the year at 660”.
Key Quotes
“The Board also pointed out that current growth appears to be in line with December’s Monetary Policy Report’s baseline scenario. Furthermore, medium-term inflation expectations remain anchored around 3%, despite the January inflation surprise which was primarily driven by the core measure”.
“With a persistently weak growth environment, combined with well-anchored inflation expectations, we continue to expect the BCCh to keep rates on hold for the duration of 2015”.
“Given the poor growth outlook (we expect growth of just 2.2% in 2016), we recognize that the risk to our call would be the potential for further easing. However, given the expectations that the Fed will begin to raise rates in the second half of the year, we believe this would be a deterrent to further easing by the BCCh, even in light of disappointing growth”.
“The very weak growth outlook, and continued pressure on copper prices, underpin our core view that CLP will weaken further. With USD/CLP currently trading at 627, we anticipate further depreciation, and forecast USD/CLP ending the year at 660”.