The BCCh paused in November after having reduced the overnight rate by a total of 200bp to 3.0% since October 2013. The central bank's recent statements were generally neutral, reflecting the environment of low growth and the uncertain external situation (which is one of the factors keeping the peso under pressure).
While the recent growth numbers and the continued acceleration in wage growth provide enough justification for the BCCh to keep rates on hold in the near term, the composition of Chile's Q1 growth suggests that things are yet to improve meaningfully, adding to the downside risk on rates.
In fact, the BCCh did acknowledge some of these risks while reducing its 2015 growth forecast range to between 2.25% and 3.25% (thus cutting it by 0.25pt on both sides) last week and quoting a lack of improvement in business confidence as the reason, says Societe Generale.
