More Rate Cuts Ahead

The Chilean central bank left its policy rate unchanged at 5.00% in August, but we believe that the recent strength of the peso and growing economic headwinds will prompt the bank to cut the benchmark interest rate by 50 basis points to 4.50% by year-end and to 4.00% by the end of 2013. Months of below-target inflation give the bank ample room to cut rates.

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