Chile Rates to Stay Put

Chile’s central bank is seen keeping its monetary policy rate at 0.5% today and is not expected to hike it until at least 2Q, say Morgan Stanley and Barclays, in line with market consensus. “Although the central bank is likely to maintain the language regarding the stability of the policy rate at 0.5% until ‘at least Q2,’ it will probably at least highlight the recent peso depreciation in the accompanying statement,” Barclays says. The CLP has depreciated to CLP550 per USD on February 10 from CLP535 per USD February 1. Morgan Stanley believes that the ongoing economic recovery remains on track and broadly in line with the central bank’s base scenario. Although base effects should push annual inflation into positive territory as early as this month, it says price pressures remain largely muted. It forecasts annual inflation will reach 2.6% by the end of 2010, from a contraction of 1.4% at the end of 2009.