Central banks in Chile and Colombia didn’t hike interest rates as aggressively as had been widely expected this week, but we think that high inflation will, ultimately, lead to more tightening in this cycle than most are currently forecasting. Elsewhere, the start of a general strike by workers at Brazil’s central bank today to push for an inflation-busting pay rise may be symptomatic of a broader problem that high inflation in the country has tended to coincide with more disruptive labour action. Rising wage demands, coming against the backdrop of an improving labour market, could prolong the inflation problem too.
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