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Inflation rise doesn’t rule out August rate cut The larger-than-expected rise in Mexico’s headline inflation rate, to 5.0% y/y in June, was mainly due to a surge in agricultural inflation; core inflation edged down last month. While there’s still a lot of …
9th July 2024
Brazil’s President Lula has renewed his attacks on the central bank and high interest rates in recent weeks, raising fears that there could be more political influence on monetary policy from next year after he has appointed three new Copom members. …
8th July 2024
Rise in inflation makes pause in easing cycle likely The fourth consecutive increase in Chilean inflation, to 4.2% y/y, in June means that interest rates are likely to be left unchanged at 5.75% at the central bank’s meeting at the end of the month. We …
Chile’s economy losing momentum Having made a very strong start to the year , the latest activity data suggest that Chile’s economy struggled in Q2. The monthly activity index (Imacec) contracted by 0.4% m/m in May – the third consecutive monthly decline. …
5th July 2024
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
2nd July 2024
Failed coup, economy on the ropes The news on Wednesday that armed soldiers had tried to storm Bolivia’s presidential palace in an attempted coup seemed to hark back to the Latin America of the 1970s (as well as a James Bond film of the 2000s). The …
28th June 2024
This page brings together our analysis of how Donald Trump's return to the White House will affect the outlook for emerging economies. Use the Table of Contents on the right to navigate. All of our analysis on the election, including the implications for …
Rates on hold again, but a dovish tilt Mexico’s central bank left rates unchanged at 11.00% today, but there was a surprising dovish shift in the Board’s communications – despite the post-election fall in the peso. A small reduction in the policy rate …
27th June 2024
Monday marks the 30 th anniversary of the introduction of Brazil’s currency, the real, as part of a stabilisation plan (the Plano Real ) which successfully tamed runaway inflation. For other EMs facing similar problems, most notably Argentina, the key …
Slightly softer inflation print won’t ease Copom’s concerns The slightly lower-than-expected Brazilian inflation figure, of 4.1% y/y, for the first half of June won’t change the picture that the central bank’s easing cycle is over – for this year at …
26th June 2024
After a strong start of the year, regional growth appears to have slowed in Q2 and we expect this to continue in the coming quarters. Brazil and Mexico’s economies are likely to underperform the Andes and disappoint consensus expectations in the next …
25th June 2024
Strong services inflation and fall in peso to keep Banxico in hawkish mood The continued strength in core services inflation in Mexico in the first half of June, combined with the post-election slump in the peso and heightened political uncertainty, means …
24th June 2024
IMF praises Milei but more to be done The eighth review of Argentina’s $44bn IMF programme, which was published this week, is a whole-hearted endorsement of President Milei’s economic record. It notes that the “program remains firmly on track” and that …
21st June 2024
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
Overview – The economies of Latin America started the year on the front foot, but the strong growth rates recorded in early 2024 are unlikely to be sustained and growth in many parts of the region is likely to be soft in the coming quarters. This is …
20th June 2024
There is a growing chance of a La Niña weather pattern taking hold in the second half of this year. While the economic effects would depend on its severity and length, La Niña events tend to coincide with higher food inflation across Latin America, which …
No room for rate cuts this year The Brazilian central bank kept the Selic rate unchanged at 10.50% and with the headline inflation rate set to rise further in the coming months, we see no room for a resumption of the easing cycle this year. The decision …
19th June 2024
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting suggest that the easing cycle over the next few quarters will be stop-start. We now expect a pause at the central bank’s next two …
Peso, real falls to add to central banks’ hawkishness Recent sharp falls in the Brazilian real and Mexican peso will add to concerns at their respective central banks. We now expect no further rate cuts in Brazil this year and the risks to our …
14th June 2024
Rise in services inflation takes rate cuts off the table The rise in inflation in Brazil to 3.9% y/y in May and, more importantly, the re-acceleration in underlying core services inflation means we no longer expect a rate cut at the Copom meeting next …
11th June 2024
Mexican President-elect Claudia Sheinbaum’s strong environmental credentials mean that a shift away from fossil fuels and towards renewables is likely during her tenure. We doubt that she’ll fully open up the energy sector to private investment and think …
10th June 2024
Mexico: Morena supermajority spooks investors Investors have reacted negatively to Mexico’s election outcome, with the peso selling off sharply after the announcement of the election results. And while the currency has pared some of its losses, it’s still …
7th June 2024
Mexico’s strong services inflation to concern hawkish Banxico Mexico’s headline inflation rate came in at a weaker-than-expected 4.7% y/y in May but the continued strength of core services inflation means that it is increasingly likely that Banxico will …
Q1 pick-up likely to be followed by weaker Q2 The sharp pick-up in Brazil’s GDP growth to 0.8% q/q in Q1 is a temporary rebound from a weak patch in the second half of last year and doesn’t mark the start of a strong recovery. Still, the pace of economic …
4th June 2024
Our initial response to Claudia Sheinbaum’s victory in Mexico’s presidential election can be found here . We also held a Drop-in earlier today. This Update summarises the key points that we discussed and answers some of the client questions that we …
3rd June 2024
Sheinbaum is president-elect, Morena coalition on course for majority The ruling Morena candidate, Claudia Sheinbaum, is on course to be declared the country’s next (and first female) president after Sunday’s election and the party’s coalition also …
What to watch after Mexico’s election Mexicans head to the polls on Sunday to elect thousands of local officials, a new congress and the country’s next president. We have covered the macroeconomic implications of the election in several pieces – all of …
31st May 2024
A victory for Claudia Sheinbaum in Mexico’s election on Sunday is likely to see a continuation of Amlo’s generous social policies – which will also make Banxico’s fight against inflation harder. The main points of contrast with Amlo are that she will face …
29th May 2024
Fall in inflation means rate cut in June still in play The decline in Brazilian inflation to 3.7% y/y in the first half of this month, coupled with signs of easing price pressures in some core categories, will provide relief to policymakers at the central …
28th May 2024
Mexico’s election race enters the final phase Next week marks the final week ahead of Mexico’s election, in which all seats in congress, thousands of local government positions and, most importantly, the presidency are up for grabs. The opinion polls …
24th May 2024
Strength of services inflation still a point of concern for Banxico The rise in Mexico’s headline inflation rate to 4.8% y/y in the first half of May was driven by another jump in agricultural price inflation. But core services inflation remained …
23rd May 2024
While GDP growth in the Andean economies will be stronger this year than last, the opposite is likely to be the case in Brazil and Mexico. Core services inflation, which central banks are paying close attention to, is showing signs of easing. But with …
22nd May 2024
The sharp rise in Brazil’s goods exports and the widening of the trade surplus since 2019 have been a point of strength for the economy. But we think these will reverse course before long. This feeds into our below-consensus GDP growth forecasts and our …
21st May 2024
The strong pick-up in Andean economies at the start of this year confirms that their painful rebalancing process has run its course. GDP growth will be stronger this year than last – unlike in Brazil and Mexico. Chile is likely to be a regional …
A strong start to the year The 1.9% q/q rise in Chile’s GDP in Q1 confirms that the economy is gathering momentum following a weak 2023 and has prompted us to revise up our (once above consensus) 2024 GDP growth forecast to 2.8% (from 2.3%). It also …
20th May 2024
Abinader again The Dominican Republic’s general election on Sunday is likely to buck Latin America’s anti-incumbency wave. Opinion polls point to current president Luis Abinader comfortably winning re-election. Indeed, some of the latest surveys put him …
17th May 2024
The policies of the Mexican presidential frontrunner, Claudia Sheinbaum, would provide a more supportive environment for the nearshoring of manufacturing supply chains. But we doubt that she’ll carry out the wholesale economic reforms needed to reap the …
16th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
The 1.1% q/q expansion in Colombia’s GDP in Q1 confirmed that the economy made a strong start to the year and supports our view that the central bank won’t step up the pace of easing at its next meeting in June. The outturn was a touch below the Refinitiv …
Minutes suggest Copom isn’t so divided The minutes to last week’s Brazilian central bank meeting suggest that the balance on Copom is, overall, more cautious than had been widely assumed immediately after the meeting. That may provide some support to the …
14th May 2024
Sharp fall in services inflation points to another rate cut The fall in Brazilian inflation to 3.7% y/y last month and, more importantly, the sharp decline in underlying services inflation suggests that, despite the hawkish language in the Copom statement …
10th May 2024
Mexico: more support for Pemex? One of the central views of the Update we published earlier this week on Mexico’s public finances was that limited fiscal room combined with presidential frontrunner Claudia Sheinbaum’s strong environmental credentials …
Easing cycle paused, rate cuts to be more gradual than most anticipate Mexico’s central bank paused its easing cycle at today’s meeting and, while we expect interest rate cuts to resume soon, we think that monetary conditions will be kept tighter than …
9th May 2024
The scale of the economic impact of the floods that have affected much of the southern state of Rio Grande do Sul will depend on how long it takes for the waters to recede and for reconstruction efforts to get underway. Given the region’s importance to …
Although the monetary easing cycle in Brazil is entering a much slower phase, we think the Brazilian real will remain under pressure against the dollar over the coming quarters. Emerging market (EM) currencies have generally struggled against the …
Inflation rises, Banxico to pause later today The rise in Mexico’s headline inflation rate, to 4.7% y/y in April, was mainly due to a fresh jump in agricultural inflation which masked a fall in core inflation. Still, there’s nothing in the data which …
Easing cycle set to enter a stop-start phase The Brazilian central bank’s decision to cut the Selic rate by 25bp to 10.50% (rather than opt for another 50bp step) and drop its forward guidance confirm that most of the rate cuts in this easing cycle are …
8th May 2024
The Mexican government’s pre-election spending spree means that the next administration will have its work cut out to put the country’s public finances back onto a stable footing. Claudia Sheinbaum, the frontrunner to be the next president, has so far …
Rise in inflation shifts odds in favour of a 50bp cut The slightly larger-than-expected rise in Chile’s inflation to 4.0% y/y in April supports our view that the central bank will once again slow the pace of easing with a 50bp cut (to 6.00%) at its …
Encouraging start to the year Growth in the region came to a standstill in Q4 of last year, but data released over the past week add to the evidence of a strong rebound in Q1. Admittedly, the flash GDP data from Mexico released on Tuesday showed that, …
3rd May 2024
