Monetary policy stance slowly shifting

The raft of inflation data over the past couple of weeks will have provided some relief for Latin American central banks, with headline rates in most countries now on a clear downward trajectory. In Mexico this means that a final rate hike in May now looks less certain, while investors are pricing in rate cuts in Brazil as early as August. The recent hawkish comments by policymakers in the region’s major economies alongside still-strong core price pressures mean that rate cuts there are still some way off. But the fact that Uruguay and Costa Rica have kicked off their easing cycles suggests that the monetary policy tide is starting to turn and we expect the larger economies to start joining the rate cut club in the second half of the year.