Chile: Central bank cut policy rate by 25bp and kept its dovish bias

Summary

As expected by consensus, the Central Bank cut the policy rate by 25bp to 3.50% and kept an explicit dovish bias at today’s meeting. In our view, this option prevailed in the board’s arguments due to monthly inflation prints that showed inflation beginning to ease – although annual figures are still above its tolerance range – while activity data continues to surprise to the downside. In this context, we still consider that future monetary policy decisions will remain data-dependent on inflation figures, nonetheless further stimulus would be necessary for the rest of the year (BBVAe: 2.75% at 2014 eop) in order to anchor medium-term inflation at 3% YoY that started to show incipient signs of misalignment.

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