By Jude Webber
As the song goes dime cuándo, cuándo, cuándo… (tell me when, when, when…).
The minutes of Chile’s May central bank meeting, when the key lending rate was kept on hold at 0.5 per cent, revealed that discussions intensified behind closed doors about when to start increases. No surprises there – there has been intensifying discussion about that for a while.
So the real question is perhaps not, ‘will rates rise at the next meeting, on June 15′, but ‘how much will they rise?’
Alberto Ramos at Goldman Sachs reckons on a 25 basis point rise. As he says:
The message in the minutes should be somewhat discounted as it reflects the data available up to that meeting … Since then the leading indicators of activity were significantly stronger than expected and today’s labor market report was also much better than expected. Assuming the global market sentiment does not deteriorate from here with the European fiscal situation the rate normalisation cycle should begin in June.
Chilean inflation data, he says, could provide the pointer – a worse than expected result could lead the bank to hike by a half point. Consumer prices rose 0.5 per cent in April, pushing annual inflation to the fastest pace since June 2009.
The minutes revealed it was unlikely to keep the rate unchanged for many more months and
…in that sense, the flows of information will allow us better to calibrate the size of the rate rise required to keep to the goal, but that does not imply that waiting will afford relatively more information about the optimum time to begin normalisation.
Roubini’s Bertrand Delgado reckons the central bank will start tightening in June or July with a 25 point hike and: