Mexico’s headline inflation rate edged up to 7.9% y/y in January, setting the scene for Banxico to raise interest rates by 25bp, to 10.75%, later today. We think that this will mark the end of the tightening cycle, but the pick up in services inflation raises the risk that officials deliver a bit more tightening. In Brazil, inflation remained at 5.8% and with inflation above target, fiscal risks persisting and the central bank’s independence being challenged, interest rate cuts are unlikely until Q4 at the earliest.
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