Inflation has continued to slow in most countries in Latin America, with the notable exception of Brazil. Here, inflation has accelerated to 6% as supply constraints have aggravated core price pressures. One consequence for Brazil is that there is little room for further near-term policy measures to support growth. Another is that the Brazilian authorities have become less vocal in expressing concerns about the strength of the real than in the past. More generally, as global “currency wars” threaten to re-escalate, it seems that policymakers in Latin American countries with lower rates of inflation – notably Chile, Peru and Colombia – will be more willing to take aggressive action to prevent excessive exchange rate appreciation.
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