Chile Seen Shaving Rates 25bp

Celfin Capital and Barclays expect Chile’s central bank to cut the monetary policy rate by 25bp to 0.5% July 9. “This [forecast] is in continuing reaction to the sharp slowdown in the Chilean economy, reflected by falling inflation readings – including months with deflation – since November 2008,” Celfin says. Annual inflation stood at 3.6% in June, according to the central bank. Barclays expects the cut to be the last one for the year, based on central bank minutes, which it says suggest 0.50% as a likely minimum for the policy rate, beyond which further rate cuts could create distortions. The consensus expects the rate to be increased to 1.5% by May 2010.