- Last weekend’s violent protests in Chile took everyone by surprise. However, given the strong institutional setup, the long-term impact is likely to be modest.
- The government has announced measures that imply some higher issuance and stimulus, which at the margin should result in higher rates at the long-end.
- BCChile, meanwhile, has been cautious and stuck to a 25bps cut, in line with our call and the consensus. We expect one additional 25bps cut in December to end the cycle at 1.5%.
- We keep our existing recommendations for Chilean assets, as described in our latest piece: a) tactically short USDCLP ; and b) paying 1Y1Y and 5Y rates as directional medium-term trades.
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