Wage growth still an inflation threat in Lat Am & CEE

Despite the slowdown in EM GDP growth in Q2, there’s little sign that labour markets are softening. Wage growth remains alarmingly strong across much of Latin America and Central Europe (CEE). That supports our view that, while central banks in these regions have started to loosen monetary conditions with large interest rate cuts, strong inflation pressures will bring easing cycles to a more gradual phase next year. Indeed, our interest rate forecasts in these regions are generally higher than the consensus.