The rise in inflation to multi-decade highs across much of the region in April is clearly worrying policymakers and, this week, Mexico’s government became the latest to announce measures to cushion the blow to consumers. Mexico’s plan should help to reduce inflation a little, but it will incur a fiscal cost and faces major implementation challenges. In the meantime, the latest inflation developments and comments from central banks support our view that interest rates across the region will be hiked further than most currently expect.
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