According to Diario Financiero, financial traders expect the Banco Central de Chile (Chile's central bank) to keep the Tasa de Política Monetaria (TPM, the monetary policy rate) at 4.5% at the meeting ending on Tuesday, October 27. They also raised their inflation forecast for this month.
The figure comes from the Encuesta de Operadores Financieros (EOF, the Financial Traders Survey). The Banco Central conducts this poll among market participants before each Reunión de Política Monetaria (RPM, monetary policy meeting). So far, no other outlet has confirmed the results.
The TPM is the system's benchmark rate. Think of it as the base price of money: when it rises, banks charge more to lend, and when it falls, loans get cheaper. If it stays at 4.5%, the cost of your consumer loans or mortgages should not change as a result of this decision.
Respondents believe the rate will stay at that level for at least the next 24 months. But among the 62 responses there is a shift from September. In that survey, only three analysts expected a hike in December. Now there are six.
For the January meeting, 14 responses point to a rate increase, double the number a month ago. They are still a minority, but more and more traders see credit possibly becoming more expensive early next year.
On inflation, the average forecast expects the Índice de Precios al Consumidor (IPC, the consumer price index) to rise 0.5% in October. That is one tenth of a point more than expected in the September survey. For November, traders project another 0.5% monthly increase.
For reference: if a basket of goods costs you $100,000, a 0.5% increase brings it to $100,500. It may seem small, but two consecutive months at that pace add up to an increase of around 1%.
Over the next 12 months, market participants expect cumulative inflation of 3.7%, two tenths more than in the previous survey. At 24 months, the forecast reached 3.2%, one tenth above what they projected a month ago. The Banco Central's target is 3%.
According to the Diario Financiero report, part of these short-term pressures comes from the rise of the dollar against the Chilean peso. In recent weeks, the currency came close to $1,000. When the dollar rises, imported goods and fuel become more expensive.
Traders now estimate that the average dollar will reach $980 over the next seven days, $35 more than a month ago. At 28 days they also project $980, $40 above the previous survey.
The Banco Central will announce its rate decision on Tuesday, October 27.
