Milei’s setback, Venezuela’s sanction, new rate forecasts

Argentine President Milei's ambitious stabilisation plan suffered a major blow in the past week and flipping the primary balance back into surplus is now looking increasingly difficult. Elsewhere, tensions between the US and Venezuela have intensified and a reimposition of US sanctions on Venezuela's oil sector in April seems likely. Finally, this week's data and central bank communications have prompted us to tweak our interest rate forecasts. We now expect interest rates in Chile to come down more quickly while easing in Mexico and Colombia is likely to be more gradual than we'd previously anticipated.

EM Drop-In: We'll be discussing EM policy easing, debt risks and the outlook for bond yields in our monthly EM drop-in on Thursday 8th February. Register here.