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The decision by Chile’s central bank to deliver a surprisingly large 150bp rate hike yesterday, to 5.50%, supports our view that the tightening cycle will go further than the path it had previously signalled. That said, we think that the dramatic upward …
27th January 2022
Another 150bp rate hike almost certain next week The stronger-than-expected Brazilian mid-month inflation reading for January, of 10.2% y/y, means that the central bank is on course to hike the Selic rate by another 150bp (to 10.75%) next Wednesday. That …
26th January 2022
Political risk will be a major theme once again in Latin America this year, although recent developments have given cause for cautious optimism. Chilean President-elect Boric’s appointment of Mario Marcel , the current Central Bank Governor, as the next …
25th January 2022
Inflation peaked but will remain stubbornly high The fall in Mexico’s inflation to 7.1% y/y in the first two weeks of the year gave the first sign that inflation has peaked and we think that it will continue to trend lower over the coming months. That …
24th January 2022
Chile: Boric appoints ‘Super Mario’ Marcel President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal …
21st January 2022
Overview – The regional recovery will lag further behind others in the emerging world in the coming years. The Omicron-led surge in virus cases presents a risk to growth in the near term, but we suspect that the economic hit will be small. Larger drags …
20th January 2022
Brazil: Early clues on Lula’s policy stance There have been some recent clues that Brazil’s former left-wing president Lula, the current favourite to win October’s election, may not be as radical as some fear. But there is still a clear risk that he would …
14th January 2022
Although the Argentine government and the IMF do not fully see eye-to-eye, there have been signs of progress in negotiations and we think it’s most likely that they will sign a fresh agreement within the next few months. That would probably give some …
12th January 2022
Industrial woes continue The disappointing 0.1% m/m fall in Mexican industrial production in November raises the chances that the economy slipped into a recession last quarter. And while auto production looks to have rebounded strongly in December, the …
11th January 2022
Inflation fall won’t stop Copom from hiking further The fall in Brazilian inflation to a four-month low of 10.1% y/y in December confirmed that the recent food and energy inflation spikes are starting to unwind. But with the headline rate still far above …
We think that Latin American GDP growth will slow by more than most expect in 2022, while inflation will also drop more a bit more quickly than the consensus anticipates. This feeds into our relatively dovish monetary policy views across the region. …
10th January 2022
Omicron taking hold in Latin America New virus cases have jumped almost five-fold in Latin America over the past two weeks as the contagious Omicron variant is taking hold, but we suspect that the economic fallout will be limited. Caseloads are …
7th January 2022
Strong inflation to prompt rate hikes in Mexico and Chile Inflation in Mexico stabilised at 7.4% y/y in December and, with price pressures likely to remain strong, we expect Banxico to deliver another 50bp rate hike, to 6.00%, at its meeting in February. …
Industrial recession continued in Q4 The 0.2% m/m fall in Brazilian industrial production in November, taken together with the weak surveys for December, suggests that the sector probably knocked 0.1-0.2%-pts off q/q GDP growth in Q4. There’s a very real …
6th January 2022
High inflation will keep central banks in tightening mode The fall in Brazilian inflation, to 10.4% y/y, in mid-December is likely to be followed by further declines in the coming months. Inflation in Mexico edged up in the same period, to 7.45% y/y, but …
23rd December 2021
Recoveries across Latin America have lost momentum in Q4 even though, unlike in other regions such as Europe, new COVID-19 cases generally remain low and containment measures are still light-touch at this stage. The situation could get worse if the …
22nd December 2021
Gabriel Boric’s victory in Chile’s presidential election is another sign that the country is moving towards greater state intervention in the economy. A radical shift in policymaking seems unlikely. But the public debt-to-GDP ratio looks set to rise much …
20th December 2021
Our hits and misses from a volatile 2021 2021 was another whirlwind year for Latin America. The economic recovery has been bumpy, financial markets have underperformed, and Lionel Messi finally won the Copa América (sorry Brazil fans). In the final Weekly …
17th December 2021
Banxico added to this week’s global central banking bonanza with a surprise 50bp hike, to 5.50%, and the widespread hawkish shift on the Board suggests that policymakers will act more aggressively to tame above-target inflation. We now expect a further …
Chile’s central bank raised its policy rate by another 125bp yesterday, to 4.00%, and the accompanying statement, alongside today’s Monetary Policy Report , suggest that its tightening cycle will be more aggressive than we’d previously thought. We now …
15th December 2021
The recent batch of GDP figures showed that growth in Latin America as a whole picked up in Q3, but the region’s recovery so far has been one of the weakest in the emerging world. And growth prospects are only deteriorating, suggesting Latin America will …
13th December 2021
Copom waiting for expectations to fall The Brazilian central bank’s (BCB’s) meeting this week was, on balance, a hawkish one. There was another 150bp hike in the Selic rate, to 9.25%, and policymakers didn’t engage in the debate about whether higher rates …
10th December 2021
Auto sector leads a small rebound The small 0.6% m/m rise in Mexican industrial production in October was helped by a rebound in auto production, suggesting the sector may be starting to turn a corner. However, the risk of further global supply …
Early signs of stabilisation The slightly softer-than-expected Brazilian inflation figure, of 10.7% y/y, isn’t going to stop Copom from hiking the Selic rate by another 150bp (to 10.75%) when it meets in early February. But it does provide a sign that …
Inflation hits 20-year high but another 25bp hike still likely The rise in Mexico’s headline inflation to a 20-year high of 7.4% y/y in November will be a concern for Banxico. But it was partly driven by unfavourable base effects which will soon unwind. …
9th December 2021
Brazil’s central bank gave a clear steer that, even though the economy entered recession in Q3 and shows little sign of growth in Q4, it will follow the 150bp hike in the Selic rate yesterday (to 9.25%) with further aggressive tightening. We now think …
Multi-year high inflation will prompt further aggressive hikes The further rise in Chile’s inflation to 6.7% y/y – the highest rate since late 2008 – will keep pressure on the central bank to deliver further aggressive monetary tightening. We expect …
7th December 2021
More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
3rd December 2021
Early signs of another contraction in Q4 The surprise 0.6% m/m fall in Brazilian industrial production in October and weakness in the surveys for last month provide early evidence that the contraction in the economy last quarter may be followed by another …
In recession despite re-opening The 0.1% q/q fall in Brazilian GDP in Q3 confirmed that problems in the agricultural and industrial sectors tipped the economy into a technical recession. And with financial conditions tightening, the terms of trade …
2nd December 2021
Chile’s economy has been operating above potential for several months but there are signs that activity is starting to cool. And policy tightening, falls in copper prices and the possibility of more stringent virus restrictions in light of the Omicron …
1st December 2021
New face but same gradual tightening at Banxico Mexican President López Obrador delivered another (unhappy) surprise to markets this week by unexpectedly changing his nomination for Banxico’s next governor from Arturo Herrera to Victoria Rodríguez. But we …
26th November 2021
The final estimate of Mexican Q3 GDP data was revised down to a 0.4% q/q fall (original -0.2% q/q), but the breakdown showed the contraction was almost entirely due to an outsourcing law that hit services output. Regardless of this statistical quirk, …
25th November 2021
175bp rate hike on the cards The Brazilian inflation reading of 10.7% y/y in mid-November (the same as the October full month figure) provides the first sign that inflation is now stabilising. But with the headline rate still far above target and fiscal …
Political developments in Latin America have generally turned in investors’ favour this month. Right-wing José Antonio Kast beat his left-wing rival, Gabriel Boric, in the first round of Chile’s presidential election which buoyed local markets. Elsewhere, …
24th November 2021
Banxico tightening likely to remain gradual despite inflation surge The surge in Mexico’s inflation to 7.05% y/y in the first two weeks of November – the highest since 2001 – was partly a result of unfavourable base effects, but underlying price pressures …
Overheating in Chile fueling external imbalances Much of the focus on Chile this week has been on the upcoming general election on Sunday and the strength of the Q3 GDP data . But an important development that may have flown under the radar is that …
19th November 2021
The frontrunners in Sunday’s presidential election in Chile, Gabriel Boric and José Antonio Kast, hold different views on the desired size of the state in the economy, but both advocate relatively loose fiscal policy. This would help to support economic …
18th November 2021
Turbocharged recovery to prompt more aggressive hikes The 4.9% q/q surge in Chile’s GDP in Q3 took output not only above its pre-pandemic level but also its pre-crisis trend . The strength of the figures means that we now expect above-consensus growth of …
Fiscal balances have generally improved across Latin America this year (barring Chile and Colombia) but we think that governments in most major economies will struggle to implement the substantial austerity needed to stabilise public debt-to-GDP ratios. …
17th November 2021
Economy roaring back to life The stronger-than-expected 5.7% q/q jump in Colombia’s GDP in Q3 more than offset the setback in Q2, and took output 2.6% above its pre-pandemic level. While the recovery will slow from here, we now expect above-consensus GDP …
16th November 2021
By next year, Brazil’s public sector interest payments could be almost twice as large (at ~8% of GDP) as they were in 2020, making the challenge of stabilising the public debt-to-GDP ratio all the more difficult. A lot of the focus of the implications of …
15th November 2021
Core inflation running hot … Another week, another alarm bell for central bankers in the region. This time it was the turn of the October CPI figures, which showed further increases in Chile (to 6.0%), Mexico (6.2%) and Brazil (10.7%). Global energy …
12th November 2021
The Mexican central bank’s 25bp rate hike, to 5.00%, and the accompanying statement showed little sign that policymakers are likely to follow their peers in Latin America by upping the pace of tightening in response to strong inflation pressures. The …
Auto slump drags down industry The surprise 1.4% m/m drop in Mexican industrial production in September in large part reflects auto sector woes and suggests that the flash Q3 GDP estimate of -0.2% q/q may be revised down. This release adds to our view …
11th November 2021
The ruling Frente de Todos (FdT) coalition is likely to lose some of its power in congress in Argentina’s midterm elections on Sunday. Policymaking could subsequently go in one of two ways. Our baseline scenario is that, with electoral concerns out of the …
10th November 2021
Risk of an even larger rate hike growing The larger-than-expected jump in Brazilian inflation, to 10.7% y/y, last month, coming alongside a rise in inflation expectations and continued fiscal risks, increases the likelihood that Copom ups the pace of …
Another 25bp rate hike on the cards The rise in inflation in Mexico to 6.2% y/y in October paves the way for another rate hike at the central bank’s meeting on Thursday. However, the surprise fall in GDP in Q3 will probably keep the pace of tightening …
9th November 2021
Chile: red-hot recovery starting to boil over Strong September activity (Imacec) data out of Chile this week adds to signs that that the economy is running hot, which will put more pressure on the central bank to take some steam out of the recovery. The …
5th November 2021
We think that the Brazilian real will weaken a bit further against the US dollar over the next year, as fiscal risks and deteriorating terms of trade continue to weigh on the currency. With the exception of the Turkish lira, the real has been the …
4th November 2021
