Inflation has continued to fall across Latin America – our measure of regional inflation (excluding Argentina and Venezuela) dropped below 4% y/y for the first time since 2010 last month. This is due largely to the collapse in Brazilian inflation, which reached a near twenty-year low of 2.8% y/y in the first half of July. But price pressures have also eased further in Colombia, Chile and Peru. This should give most central banks cover to continue easing monetary policy over the coming months. Indeed, in Colombia, Chile and Peru we expect more easing than the consensus and financial markets currently expect. Mexico is the regional outlier, with headline inflation there running at an eight-year high. But the latest data suggest that it is close to peaking and this should be enough to dissuade its central bank from tightening monetary policy further.
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