Chile's central bank appears to be in a tightening cycle. Despite high headline inflation and waning credibility. The local swap market moved to pricing 2y headline inflation from last year's 1.9% to 3.1% now.

The headline inflation finally dropped back below 4% in November, standing at 3.9%. The inflation target is at 2-4%.'In 2013, the headline inflation was below 2% the last time.

"We therefore believe BCCh may hike at least an additional 50bp before the peso stabilizes. The decision to hike in December should be good news. We forecast USD/CLP at 720 in March and worry that the risk to this forecast might be on the upside", says RBC Capital Markets.