Chile Rate Hike Expected

Analysts expect a 50bp hike in Chile to 8.25% after the central bank meeting next week, citing the persistence of high inflation and unexpected strength of domestic demand. “Inflation has surprised in terms of magnitude and the extent of generalization across items, showing increasing spreading of the food and energy shocks. The central bank has reacted forcefully with three consecutive 50bp interest rate hikes and probably a fourth next week,” says Barclays. The shop also expects that the hikes will continue up to 9.25% by year-end, as inflationary pressures continue. Earlier this month the Chilean central bank hiked the rate 50bp to 7.75% and minutes from the August 14 meeting are due out today. “We expect the minutes to contain language similar to the hawkish language in the July minutes, with the central bank reaffirming its commitment to continue to hike rates to anchor inflation expectations and contain second-round effects from the recent surge in inflation,” says Goldman Sachs. “We see another policy rate hike in September of 50bp,” it adds.