Chile’s central bank not waiting around

The decision by Chile’s central bank to deliver a surprisingly large 150bp rate hike yesterday, to 5.50%, supports our view that the tightening cycle will go further than the path it had previously signalled. That said, we think that the dramatic upward shift in investors’ rate expectations has probably gone a bit too far. At this stage, we continue to expect that the policy rate will rise to 7.00% in the coming months.