Although the incoming data from Latin America have shown tentative signs that the recovery in the region is losing some of its steam, this is in line with our expectations and does not alter the outlook for monetary policy. Policymakers in Brazil are likely to continue with relatively aggressive rate hikes in the near-term in an attempt to front-load tightening ahead of October’s elections. Meanwhile, the inflation threat is less obvious in Chile and Peru, but strong growth means that it is sensible to lift rates from the ultraloose levels adopted last year. Elsewhere, weaker growth and more benign outlooks for inflation in Colombia and Mexico mean that rates there are set to remain on hold until the second half of 2011. In all cases, however, we still think that the markets are over-estimating the pace of tightening.