Bank of America (BofA) analysts revised their expectations for Chile's central bank, the Banco Central de Chile (BCCh), predicting that it will maintain the current policy rate of 5% throughout the year, a shift from their previous forecast of a terminal rate of 4.5%.
This adjustment aligns with BCCh's recent hawkish stance and takes into account heightened risks both globally and locally.
The analysts at BofA have observed that global uncertainty, including the possibility of U.S. tariff hikes, has exerted pressure on the Chilean peso (CLP) and interest rates. Locally, the BCCh has expressed increased concern over underlying inflation, with some measures of inflation expectations rising in the one-year horizon.
In response to these developments, BofA has also adjusted its inflation forecast for Chile, raising it from 3.7% to 3.8% for the current year. The potential pension reform in Chile is identified as a contributing factor to the increased risk, with expectations that it could lead to higher spending and add to the existing fiscal risks, particularly after two years.
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