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Mexico & Chile Consumer Prices (Dec.)

Inflation in Mexico stabilised at 7.4% y/y in December and, with price pressures likely to remain strong, we expect Banxico to deliver another 50bp rate hike, to 6.00%, at its meeting in February. Meanwhile, the further rise in Chilean inflation, to 7.2% y/y last month suggests that the central bank will continue its aggressive tightening cycle with another 125bp hike, to 5.25%, at its next meeting.
Olivia Cross Assistant Economist
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Mexico Consumer Prices (Nov.)

The rise in Mexico’s headline inflation to a 20-year high of 7.4% y/y in November will be a concern for Banxico. But it was partly driven by unfavourable base effects which will soon unwind. And given the recent weakness in activity, we still think the pace of policy tightening will remain gradual with a 25bp rate hike, to 5.25%, at the central bank’s meeting next week.

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The unexpected change in the nomination for Banxico’s next governor, to Victoria Rodríguez from Arturo Herrera, hit investor confidence but we don't think this switch alters the outlook for Banxico’s gradual tightening cycle. Meanwhile, investors initially cheered the result of Chile’s first-round presidential election but with political risks unlikely to fade soon, and copper prices set to fall further, we see little upside in Chilean local markets from here. Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

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Chilean external imbalances, Peronists humbled

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