BCCh Decision: Cutting with Caution

BCCh Decision: Cutting with Caution

The BCCh cut the policy rate by 75bp to 9.50%. This is a reduction in the pace from the surprisingly large 100bp cut at their last meeting. They did note in the minutes and in comments that they could reduce the pace, and arguably needed to reduce the pace at some point to meet their end of year targets.

• Local market takeaway:
  • In FX: We still expect the CLP to be a bit more range bound in the near-term given the prudent decision from
    the BCCh. We expect CLP to head back towards the 850 level. In the more medium term, we expect the
    currency depreciation trend to continue heading into the autumn.
  • In local rates: We expect front-end rates to reprice higher by 30-40bp. The market continued to price in
    more aggressive cuts than the BCCh expected, leaving a 50% chance of 100bp cuts at the next two
    meetings. We await the policy guidance from the IPoM as the BCCh could signal the continuation of a 75bp
    pace into year-end.