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Brazil IPCA-15 (Apr. 2022)

The jump in Brazilian inflation to 12.0% y/y in the middle of April, coming alongside the recent fall in the real, means Copom will almost certainly raise the Selic rate by another 100bp (to 12.75%) when it meets next week. We expect a further 75bp of hikes (to 13.50%) after that, which is a little more tightening than most currently anticipate.
William Jackson Chief Emerging Markets Economist
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Latin America Chart Book

High inflation fuels strikes and protests

High inflation seems to be causing growing unrest in the region, which threatens to be economically disruptive and raise fiscal concerns. Recent protests in Ecuador have hit its oil sector hard, while truck drivers in Peru are about to embark on a strike. Elsewhere, Brazil’s government is seeking to stave off possible unrest among truck drivers with higher benefits, while Mexico’s last month sought to freeze the prices of some basic goods. It remains to be seen what impact all this will have. But the regions’ recent experience suggests that strikes and protests can hit output significantly. And higher public spending to cushion the blow to consumers and businesses will cause weigh on budget positions. EM Drop-In (Thurs, 7th July): Join our economists for their regular monthly briefing on the hot stories in EMs – and those that aren’t getting the attention they deserve. In this 20-minute session, topics will include the outlook for EM FX markets after the recent sell-offs. Register now.

28 June 2022

Latin America Economics Weekly

Petro reaction, Lula’s plans, hawkish central banks

Gustavo Petro’s win in Colombia’s presidential election has caused tremors in the country’s financial markets. While the appointment of a centrist finance minister could help to settle investors’ nerves, the global backdrop is turning increasingly unfavourable. In Brazil, Lula, the front-runner in the race for the presidency, unveiled policy plans that will, likewise, probably unnerve investors around the election there in October. Finally, the week was marked by further hawkish noises from central banks in the region. We’ve revised up our interest rate profile in Brazil and the upside risks to our interest rate forecast in Mexico are growing.

24 June 2022

Latin America Economics Update

Banxico’s tightening cycle shifts up a gear

The Mexican central bank’s shift to a 75bp interest rate hike yesterday (to 7.75%) and the hawkish language in the accompanying statement make another 75bp move at the next meeting in August a done deal. And the risks to our end-2022 interest rate forecast of 9.50%, which is already higher than most expect, are now skewed to the upside.

24 June 2022

More from William Jackson

Latin America Economics Weekly

Brazil’s election race heats up

Brazil’s presidential election race has started to take centre stage as incumbent Jair Bolsonaro has narrowed the gap in the polls with front-runner Lula. Investors’ concerns about a shift to looser fiscal policy have faded but, with neither candidate likely to pursue the reforms needed to restore long-term debt sustainability or boost growth, the risk premium on Brazilian financial assets is more likely to rise than fall further this year.

22 April 2022

Latin America Economics Update

Brazil: making sense of the latest surveys

Depending on which activity survey you look at, Brazil’s economy either staged a rapid recovery in March or slowed. A comprehensive look at the latest figures suggests that the latter is more likely. One clearer message is that price pressures remain very strong, supporting our view that Copom will raise interest rates a little further than most expect.

12 April 2022

Latin America Data Response

Brazil & Chile CPI (Mar.)

The larger-than-expected rises in inflation in both Chile and Brazil last month (to 9.4% and 11.3%, respectively) support our view that their central banks will raise interest rates by more than most currently expect over the coming months.

8 April 2022
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