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On Monday, Bank of America (BofA) provided insights into the anticipated monetary policy actions by central banks in Korea, Türkiye, and Chile.
BofA economists project the Central Bank of Korea (BOK) will slash interest rates by 75 basis points (bps) throughout the remainder of the year, despite a higher headline Consumer Price Index (CPI) in January. This follows a surprising dovish stance taken at the January meeting, with the expectation that concerns over economic growth will outweigh inflation considerations at the upcoming February monetary policy meeting.
In contrast to Korea's expected rate cuts, the Central Bank of the Republic of Türkiye (CBRT) has revised its inflation forecast for the year-end 2025 from 21% to 24%, raising the upper limit from 26% to 29%.
Although the CBRT has indicated a cautious approach to policy adjustments, BofA's economist believes there was no immediate signal for an adjustment during the latest presentation. As a result, the expectation for a 250 bps rate cut in March remains, contingent on February's inflation data providing sufficient leeway for such action.
Turning to Chile, market expectations suggest a 21 bps cumulative increase in interest rates for the rest of the year. However, BofA's economist anticipates that the Central Bank of Chile (BCCH) will maintain the current rate at 5.00% into 2025.
Recent hawkish data has likely influenced the BCCH to withdraw any guidance on further rate cuts. BofA's stance is that it is premature to expect rate hikes given that the majority of inflationary shocks seem transitory and several persistent dovish factors are still at play.
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