No more room for further monetary stimulus – for now

Last month,Banco de Chile's President Rodrigo Vergara said that the bank sees further easing as futile, given the view that a substantial part of the growth deterioration is probably structural (vs cyclical). Then the bank president suggested that while monetary stimulus has done its job, there isn't any room for additional stimulus at present. 

According to Societe Generale, "We do not think the economy is back on track, but we do agree that there isn't room for additional stimulus in light of renewed pressure on the peso and the increase in inflation. Therefore, we are comfortable for now with our call that there will be no additional monetary easing."

Societe Generale says two factors could alter the requirement of  monetary easing are as follows. 

• First, growth in H2 15 and the outlook for 2016 would have to significantly worsen (less than 2% in H2). 
  
  
• Second, inflation would have to decline faster (less than 3% in Q4 15 and H1 16) than expected at the moment.