How do Lat Am central banks set policy?

Our Taylor rules suggest that central banks in Latin America attach most importance to the latest inflation rate and the current output gap when setting policy. Some central banks (notably Mexico) take into account other factors such as the exchange rate and US interest rates but these are generally secondary considerations. Overall, our rules suggest that monetary policy in most countries is too tight, supporting the view that interest rates will fall in much of the region over the next 12 months.