Mexico Consumer Prices (Aug.)

The drop in Mexico’s headline inflation rate to 5.6% y/y in August masks a further rise in core inflation, to 4.8% y/y, which will be a concern for the central bank. This suggests that its gradual tightening cycle has further to run; we expect another 25bp rate hike to 4.75% at the next meeting later this month.
Nikhil Sanghani Emerging Markets Economist
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Latin America Economics Weekly

Chile’s constitution, Brazil fiscal worries mounting

This week marked the two-year anniversary of the mass protests in Chile which caused a political risk premium to emerge in local financial markets and the currency, and we think that lingering political risks will keep them under pressure for some time. Similarly, we think that hard-hit Brazilian assets will continue to fair poorly from here, with suggestions this week that the government will break the spending cap adding to the evidence that the country's public finances will deteriorate in the coming years.

22 October 2021

Latin America Data Response

Mexico Bi-Weekly CPI (Oct.)

The further rise in Mexico’s core inflation rate to a 12-year high of 5.1% y/y in the first two weeks of October, which contributed to the rise in the headline rate to 6.1% y/y, will add to the growing hawkish sentiment at the central bank. However, given the weakness of the economy, we think the tightening cycle will remain gradual with another 25bp rate hike, to 5.00%, at the next meeting in mid-November.

22 October 2021

Latin America Economics Focus

A fresh look at Brazil’s public debt problem

Suggestions that Brazil’s government will raise welfare spending – and circumvent the spending cap in doing so – add to the evidence that there’s little appetite for the long-term fiscal squeeze needed to stabilise the public finances. Taken together with slower growth and higher interest rates, we think that the public debt-to-GDP ratio is likely to be on an upwards trajectory from next year. This feeds into our view that government bond yields will climb higher and that the real will weaken further from here.

20 October 2021

More from Nikhil Sanghani

Latin America Data Response

Chile Consumer Prices (Aug.)

The further rise in Chile’s inflation to 4.8% y/y in August suggests that the central bank’s tightening cycle has a lot further to run. We expect a further 100bp of rate hikes, to 2.50%, by end-2021 but, given the concerning inflation outlook, the risks are skewed towards more aggressive tightening.

8 September 2021

Latin America Data Response

Chile GDP (Q2 2021)

The stronger-than-expected 1.0% q/q rise in Chile’s GDP, alongside the brightening economic outlook, means we are raising our above-consensus 2021 growth forecast to 10% (from 9%). We also expect that the central bank’s tightening cycle will be more aggressive, with the policy rate set to rise to 1.50% by end-2021 (previously 1.25%) and 3.25% by mid-2022, from 0.75% now.

18 August 2021

Latin America Economics Update

Colombia: BanRep to hike despite Q2 GDP drop

The sharper-than-expected 2.4% q/q fall in Colombia’s GDP in Q2 was largely due to protest-related disruption in May and masked a strong rebound in output at the end of the quarter. The economic recovery appears to be progressing well so far in Q3, so we still expect that the central bank (BanRep) will begin a tightening cycle at its next meeting in September with a 25bp rate hike (to 2.00%).

18 August 2021
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