The recent resilience of economic activity in Latin America will not last and we think that growth will slow by more than most expect in 2023. Having been among the first to tighten monetary policy last year and with interest rates well above their neutral level, the region’s central banks are likely to be among the first to cut rates, making policy less restrictive. We suspect that monetary conditions in Brazil and Mexico will be loosened more quickly than most are anticipating. But the strength of inflation and weak external positions mean that rates will remain higher for longer in Colombia and Chile.
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