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Investing.com - Chile’s central bank is expected to pause its monetary easing cycle in September following an unexpectedly high inflation reading in July, according to Bank of America.
Chile recorded a 0.9% month-over-month inflation rate in July, significantly above the Bloomberg consensus forecast of 0.6% and marking a sharp reversal from the -0.4% reading in the previous month.
Bank of America analysts indicate this inflation spike will likely prompt the Central Bank of Chile (BCCh) to hold rates steady at its September meeting, following a 25 basis point cut implemented in July, as policymakers assess potential second-round effects from recent cost shocks.
The bank now forecasts only two additional 25 basis point rate cuts through the first quarter of 2026, with the policy rate expected to reach a terminal level of 4.25%.
In a related development, the Chilean central bank has announced a program to purchase U.S. dollars as part of an effort to rebuild its foreign exchange reserves, while Bank of America notes that upcoming elections in the country have ambiguous implications for future monetary policy decisions.
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