Mexico Industrial Production (Jul.)

The stronger-than-expected 1.1% m/m rise in Mexico’s industrial production in July provides some encouragement that the economy fared well despite the onset of a third virus wave earlier this quarter. That said, the latest surveys point to a worse performance in August, while weakening US demand and ongoing global shortages will hold back Mexican industry over the coming months. CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.
Nikhil Sanghani Emerging Markets Economist
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Latin America Data Response

Brazil IPCA-15 (Jan. 2022)

The stronger-than-expected Brazilian mid-month inflation reading for January, of 10.2% y/y, means that the central bank is on course to hike the Selic rate by another 150bp (to 10.75%) next Wednesday. That said, with inflation now past its peak and likely to fall in the coming months, policymakers may signal that the pace of tightening will slow at the subsequent few meetings.

26 January 2022

Latin America Chart Book

Some good news on the political front

Political risk will be a major theme once again in Latin America this year, although recent developments have given cause for cautious optimism. Chilean President-elect Boric’s appointment of Mario Marcel, the current Central Bank Governor, as the next Finance Minister signals that his government may pursue prudent fiscal policies. And in Brazil, former left-wing president Lula (the front-runner in the presidential race) may be moderating his stance, having mooted to have asked Geraldo Alckmin, previously Lula’s centre-right rival, to be his running mate. However, there are still lingering risks in the region. Argentina’s government continues to play hardball with the IMF as the clock ticks down to reach a new deal. The make-up of Chile’s new constitution remains uncertain. And fiscal discipline could still waver around elections in Brazil and Colombia. These risks, and the implications for public debt trajectories, will probably put renewed pressure on currencies across Latin America.

25 January 2022

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

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Latin America Economics Update

Peru: BCRP stepping up pace of tightening

Yesterday’s larger 50bp rate hike, to 1.00%, delivered by Peru’s central bank (BCRP) suggests it is becoming increasingly concerned about the inflation outlook. With inflation set to stay above the 1-3% target range over the coming quarters, and GDP growth likely to beat expectations, we now think that the policy rate will rise to 2.00% by end-2021 and 3.50% by end-2022 (previously 1.25% and 2.75%).

10 September 2021

Latin America Data Response

Mexico Consumer Prices (Aug.)

The drop in Mexico’s headline inflation rate to 5.6% y/y in August masks a further rise in core inflation, to 4.8% y/y, which will be a concern for the central bank. This suggests that its gradual tightening cycle has further to run; we expect another 25bp rate hike to 4.75% at the next meeting later this month.

9 September 2021

Latin America Data Response

Chile Consumer Prices (Aug.)

The further rise in Chile’s inflation to 4.8% y/y in August suggests that the central bank’s tightening cycle has a lot further to run. We expect a further 100bp of rate hikes, to 2.50%, by end-2021 but, given the concerning inflation outlook, the risks are skewed towards more aggressive tightening.

8 September 2021
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