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Chile and Peru: Aggressive tightening cycle seems unlikely – BBH

FXStreet (Córdoba) - Analysts from Brown Brothers Harriman expect that at tomorrow’s meetings, the central banks of Peru and Chile to leave rates steady.

Key Quotes:

“Chile's central bank meets and is expected to keep rates steady at 3.25%. The market is mixed, however. Of the 28 analysts polled by Bloomberg, 8 see a 25 bp hike to 3.5% while 20 see no change. CPI rose 4.0% y/y in October, down from 4.6% in September and right at the top of the 2-4% target range. The last move by the central bank was a 25 bp hike to 3.25% in October that started the tightening cycle, but we know that no hike was also discussed. With the economy sluggish and inflation falling, the tightening cycle is not expected to be an aggressive one. Bloomberg consensus sees roughly 25 bp per quarter of tightening through 2016, which seems too hawkish to us."

“Peru's central bank meets and is expected to keep rates steady at 3.5%. The last move was a 25 bp hike to 3.5% in September that started the tightening cycle. Inflation was 3.66% y/y in October vs. 3.90% in September, but remains above the 1-3% target range. However, it has fallen from the 4% y/y peak in August and we think disinflation should continue. The economy remains sluggish and so an aggressive tightening cycle seems unlikely. Bloomberg consensus sees roughly 25 bp every other quarter of tightening through 2016, which sounds right to us.2

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