The further drop in Mexican inflation in February was encouraging, and the breakdown contains signs of broad disinflation pressures – core inflation posted its biggest decline in over three years. The central bank is likely to stay hawkish, but our central view is that policymakers will leave interest rates unchanged (rather than hike them) at the next meeting in April. Elsewhere, inflation also fell in Chile last month, but we don’t think this will be enough to convince the central bank to ease policy further.
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