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Divergences in the inflation outlook open up

With growth prospects in Latin America starting to diverge, the outlook for inflation varies between countries. In Brazil, the rapid recovery from last year’s relatively shallow recession has caused a pick-up of inflation. Meanwhile, supply constraints and poor policies mean that inflation rates in excess of 20% remain entrenched in Argentina and Venezuela. Elsewhere, however, price pressures are more subdued. Indeed, headline inflation remains below target in Chile, Colombia and Peru. And although Mexican inflation is well above target, this is due to temporary factors. With underlying price pressures still weak, we expect inflation to drop back to target next year.

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