Chile’s central bank (BCCh) adjusted its projected pace of rate cuts back towards a less gradual approach in the September IPoM. It now forecasts reaching a neutral rate of 4.00% by 4Q25 vs. 4.25% by 1Q26. In addition, the path also suggests 25bp of cuts in consecutive meetings into year-end, against our previous view that it would maintain some caution in the near-term (i.e holding in October, cutting in December). This adjustment was made due to its view of lower dynamism in the economy, particularly slowing private consumption. It also noted that the rise in headline CPI is due to transitory, non-core variables (mainly the elimination of electricity subsidies) and that underlying inflationary pressures should be easing due to the weaker domestic demand and a more neutral output gap. With regards to the external backdrop, it noted that the expected economic impulse from abroad is similar to what was considered in June, although global financial conditions will be somewhat better due to Fed rate cuts.
For more, including views on FX and rates, please see full note.