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Mexico Consumer Prices (Apr.)

The rise in Mexico’s headline and core inflation in April, to 7.7% y/y and 7.2% y/y respectively, has a bit further to run in the near term. This will prompt Banxico to deliver another 50bp rate hike this week, to 7.00%, and we expect more monetary tightening than the consensus in this cycle. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.
Nikhil Sanghani Emerging Markets Economist
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More from Latin America

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 Nikhil Sanghani

Latin America Economics Weekly

Petro vs. Gutiérrez

This week Colombia's Liberal Party offered its backing to market-friendly Federico Gutiérrez – who currently trails left-wing Gustavo Petro in the polls – ahead of next month's presidential election. This decision may offer some solace to investors, although we think that Gutiérrez's plans for fiscal consolidation look ambitious and may be politically difficult to achieve. This suggests that, while public debt risks would be lower than under a Petro presidency, Gutiérrez may struggle to put Colombia's public finances on a sustainable path over the medium term.

29 April 2022

Latin America Data Response

Mexico GDP (Q1 Prov.)

The pick-up in Mexico’s GDP growth to 0.9% q/q last quarter was largely a result of a strong carryover from late 2021, and the economy was weakening sharply heading into Q2. As the headwinds from high inflation and weak US growth mount, we think that Mexico’s recovery will stay sluggish from here.

29 April 2022

Latin America Data Response

Mexico Bi-Weekly CPI (Apr.)

The rise in Mexico’s inflation to 7.7% y/y in the first two weeks of April was driven by a broad based strengthening of price pressures, which will be a concern for the central bank. This, alongside the increasingly hawkish US Fed, may push Banxico towards a larger 75bp rate hike at its meeting next month.

22 April 2022
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