The recession in Latin America has, for the most part, ended and the pace of recovery is likely to remain strong over the next six to nine months. We have revised up our GDP growth forecasts for 2010 and, as a result, now expect most Central Banks to begin hiking interest rates in Q2 next year (previously we had expected rate hikes to start in H2). At a country level, Brazil is likely to lead the way, with Chile and Mexico lagging behind. But the pace of tightening will be slowed initially by concerns over the strength of currencies and inflows of ‘hot money’, and then by a likely slowdown in the pace of recovery in the second half of next year. Accordingly, the relatively aggressive rates that are now priced into the markets are unlikely to materialise.