Soft inflation points to rates staying low for longer

Inflation has fallen across the region at the start of this year, and is likely to stay relatively soft in the coming months. One common driver of weaker inflation has been lower fuel inflation. But core inflation has also edged down in Mexico, Chile and Peru. In response, having previously hinted at interest rate hikes, most central banks have become more dovish and look set to postpone tightening. And in Mexico, with inflation falling particularly sharply, we’re increasingly confident in our long-held view for rate cuts to begin in Q3.