The rapid rise in inflation and sharp falls in the peso have clearly spooked Chile’s central bank and we now expect the policy rate to reach 11.0%, from 9.75% now, which puts us on the hawkish side of the debate. Elsewhere, the passage of a bill expanding social spending in Brazil ahead of the election deals another blow to the country’s fiscal rules, and it’s hard to see things improving in the next presidential term. Finally, tweaks to Argentina’s monetary policy setup point to growing fiscal dominance.
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