Peru turmoil, Chile’s lockdown, hawks & doves

Peru turmoil, Chile’s lockdown, hawks & doves

Pedro Castillo’s victory in Peru’s presidential election caused local markets to tumble, but if his more moderate post-election comments are borne out in policymaking, asset prices are likely to recover some lost ground. In Chile, while the latest lockdown has caused the near-term outlook to worsen, we retain a positive view on the economy’s growth prospects. The central bank’s forecasts published this week show that it is of a similar opinion (and that rates will rise this year as a result – in line with our projections). Elsewhere, the news that Mexico’s finance minister will take over as central bank governor next year adds weight to our view that Banxico bank will tolerate higher inflation.
William Jackson Chief Emerging Markets Economist
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More from Latin America

Latin America Data Response

Mexico Industrial Production (Apr.)

The surprise drop in Mexican industrial production in April may partly be payback for a strong March. And early indicators suggest that industrial activity picked up in May. Moreover, with services sectors recovering, we continue to think that the economy will grow by an above-consensus 6.5% this year.

11 June 2021

Latin America Data Response

Brazil IPCA (May)

The further jump in Brazil’s headline inflation rate last month, to 8.1% y/y, makes a 75bp hike in the Selic rate (to 4.25%) next week certain and Copom will probably signal that another 75bp hike is on the cards at the subsequent meeting in August.

9 June 2021

Latin America Data Response

Mexico Consumer Prices (May)

The rise in Mexican core inflation to its highest rate in over three years in May, at 4.4%, appears mainly to be related to temporary factors. Policymakers at the central bank will probably continue to adopt cautious language but so long as core inflation falls back in the next few months, as we expect, Banxico is likely to refrain from raising interest rates.

9 June 2021

More from William Jackson

Latin America Data Response

Mexico Industrial Production (Apr.)

The surprise drop in Mexican industrial production in April may partly be payback for a strong March. And early indicators suggest that industrial activity picked up in May. Moreover, with services sectors recovering, we continue to think that the economy will grow by an above-consensus 6.5% this year.

11 June 2021

Emerging Europe Data Response

Turkey Industrial Production & Retail Sales (Apr.)

The m/m falls in Turkish industrial production and retail sales in April are likely to be followed by further weakness in May (when a three-week lockdown was in place). This supports our view that the economy will probably contract in q/q terms over Q2 as a whole. We suspect that the central bank will leave interest rates unchanged when it meets next week, but the softer economic activity figures will add to demands for rate cuts, which seem likely to come in July.

11 June 2021

Latin America Data Response

Brazil IPCA (May)

The further jump in Brazil’s headline inflation rate last month, to 8.1% y/y, makes a 75bp hike in the Selic rate (to 4.25%) next week certain and Copom will probably signal that another 75bp hike is on the cards at the subsequent meeting in August.

9 June 2021
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