The latest data confirm that inflation in Latin America has bottomed out. Having hit a seven-year low of 3.6% y/y in September, our measure of regional inflation edged up to 3.9% y/y in November. This rise has been driven by stronger price pressures in Brazil and Mexico – inflation in most other countries in the region either fell or held steady last month. Looking ahead, we expect regional inflation to hover around 4% y/y over the course of next year. Inflation will drift up in Brazil, but this will be offset by falling inflation elsewhere. So while Brazil’s central bank looks set to shift into tightening mode by the end of next year, interest rates in Colombia, Chile and Peru are likely to be trimmed a bit further. And despite the growing likelihood of an interest rate hike this month, we are sticking with our view that monetary policy in Mexico will be loosened in late 2018 – assuming that left-wing firebrand Andrés Manuel López Obrador (AMLO) ultimately falls short in his third run at the presidency.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services