Brazil IPCA-15 (Aug. 2021)

The rise in Brazilian inflation to 9.3% y/y in the middle of August provides Copom with plenty to worry about and will keep it on course to hike the Selic rate by another 100bp (to 6.25%) next month.
William Jackson Chief Emerging Markets Economist
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Latin America Data Response

Mexico Bi-Weekly CPI (Jan.)

The fall in Mexico’s inflation to 7.1% y/y in the first two weeks of the year gave the first sign that inflation has peaked and we think that it will continue to trend lower over the coming months. That said, the further rise in core inflation, to 6.1% y/y, will be a concern for the central bank, suggesting that it will deliver another 50bp rate hike, to 6.00%, at its meeting next month.

24 January 2022

Latin America Economics Weekly

What does FinMin Marcel mean for Chile?

President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal policy. While the news is going down well with investors, we think that lingering political, fiscal and external risks will ultimately make it difficult for the peso to keep hold of its recent gains. We expect that the currency will weaken by 5-10% against the US dollar by year-end.

21 January 2022

Latin America Economic Outlook

Falling to the back of the pack

The regional recovery will lag further behind others in the emerging world in the coming years. The Omicron-led surge in virus cases presents a risk to growth in the near term, but we suspect that the economic hit will be small. Larger drags will come from the unwinding of fiscal support and further monetary tightening in response to high inflation. Our rate forecasts are generally more hawkish than the consensus. Falling commodity prices will also weigh on growth in the region, and will cause current account balances to deteriorate, with external positions in Chile and Colombia looking increasing shaky. Lingering fiscal and political risks will keep local financial markets under pressure in much of Latin America, particularly ahead of elections in Brazil and Colombia this year.

20 January 2022

More from William Jackson

Latin America Data Response

Mexico Bi-Weekly CPI (August)

Mexico’s headline inflation rate dropped to a weaker-than-expected 5.6% y/y in the first half of August, but the further rise in core inflation will continue to concern the central bank. We expect another 25bp hike in the policy rate, to 4.75%, when Banxico’s Board meets next month.

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Drop-In: The global trade outlook and how it might affect Asian exporters Join Simon MacAdam and Alex Holmes for a discussion about August export data so far, how we see consumer spending patterns evolving and the latest on supply chain constraints. Register here for the 0900 ET/1400 BST session on Thursday, 26th August.

24 August 2021

Latin America Economics Weekly

More fiscal worries in Brazil, the regional re-opening

Worries about a worsening of Brazil’s fiscal position in the run-up to next year’s general elections have continued to build, and we think there may now be a fiscal risk premium of about 50bp embedded in sovereign dollar bond yields. Meanwhile, governments in the region took several important steps towards re-opening this week, and near-term economic prospects continue to brighten. But the growing prevalence of the Delta variant poses a worrying threat.

20 August 2021

Latin America Chart Book

Inflation risks growing

Inflation is at, or close to, multi-year highs across Latin America which has prompted a slew of interest rate hikes across the region. We think that central banks in Brazil, Mexico, Chile and Peru will continue their tightening cycles over the coming months, and that Colombia’s will soon join the club. However, in general, we expect that inflation across Latin America will fall in 2022 as temporary factors (base effects linked to fuel prices, re-opening effects, supply shortages) unwind, bringing tightening cycles to an end within a year or so. A key risk is if the current high rates of inflation cause expectations to drift higher, which may prompt central banks to press on the brakes more aggressively than we currently anticipate.

19 August 2021
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