Chile and Peru both cut their MPRs by 25bp in a context of weaker than expected activity figures

Summary

As expected in Chile, the decision is in line with the weak activity figures and transitory elements behind the rise in inflation. We consider that further stimulus is necessary for the rest of the year. In the case of Peru we estimate the effectiveness of the rate cut will be limited because the transmission mechanism through the traditional monetary channel is impaired. Despite this, the tone of the statement suggests that we cannot rule out a possible further cut in the policy rate before the year-end.

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