Latin American central banks are becoming increasingly hawkish, not just in Mexico (after yesterday's surprise rate hike), but also in Brazil and Chile. Colombia may soon join this club. While the region appears to be on the brink of a broader tightening cycle, in general we think that the upward revision to investors’ rate expectations has gone too far. Otherwise, virus outbreaks appear to be easing across the region suggesting restrictions may be eased soon, which would boost recoveries in Q3. Brazil is a key exception – virus cases are hitting record highs – although its economy seems to be adapting to this state.
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