Chile: Central Bank cut policy rate in 25bp and kept its dovish bias

Summary

As expected by both ourselves and the consensus, the central bank cut policy rate in 25bp to 3.75% and kept an explicit dovish bias in today’s meeting. In our view, this option prevailed in the board’s arguments due to recent monthly inflation print that began to ease –although annual figures are still above 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: at least 3.25% at 2014 eop) in order to warrant medium-term inflation at 3% YoY.

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