This week’s larger-than-expected interest rate hike in Mexico alongside comments from central bank officials elsewhere suggest that worries about strong underlying price pressures are putting policymakers in a more hawkish mood than we had anticipated. We were already on the hawkish side of the interest rate debate but, if anything, the risks to our interest rate forecasts are skewed to the upside. Meanwhile, in Brazil, next week's National Monetary Council meeting will give a better sense of whether President Lula’s attacks on the central bank are rhetoric or something more serious.
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