Chile: Further deterioration in growth prospects and a 25bp cut in rates is expected for next week’s monetary policy meeting

Summary

The Central Bank’s survey revealed a consensus growth forecast for the monthly economic activity index of around 2.6% YoY in June (BBVAe: +2.0/+3.0% YoY), highlighting a sixth consecutive downward correction in GDP growth expectations for 2014 from 3.0% to 2.9%, mainly influenced by incoming activity figures, while for 2015 is also expected lower GDP growth, from 4.0% to 3.8%. In term of prices, surveyed analyst expects CPI inflation at +0.2% MoM in July (BBVAe: +0.1/+0.2% MoM). Annual inflation expectations for December 2014 are steady at 3.8%, while for the longer term estimates remain anchored to the Central Bank’s target. Finally, in terms of monetary policy, the median of analysts anticipates a 25bp cut in the reference rate at next week’s meeting (57% of those surveyed) and another 25bp cut in a five-month horizon (64% of respondents). In this regard, consensus for policy rates in 2014eop remains at 3.50%, while our expectation is of at least 3.25% beginning with a 25bp cut in July.

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