It’s been a good month for Latin American currencies, particularly the Brazilian real and the Colombian peso, which should help the disinflation process across the region. This is one reason behind the recent dovish shift by the region’s central banks. Indeed, communications from Chile’s central bank reinforced our view that the first rate cut will come in July while the surprisingly dovish tone in the minutes to Copom’s last meeting point to the easing cycle in Brazil starting in August. Colombia and Mexico are set to join the rate cut club in later in the year. That said, even as central banks shift towards easing, we think they will tread more cautiously than most currently anticipate.
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