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This webpage has been updated with a table and chart of key data. Falling inflation to keep Banxico on hold later today The further decline in Mexico’s headline inflation to 5.2% y/y in the first half of June will comfort policymakers at Banxico and …
22nd June 2023
The somewhat cautious tone of the statement accompanying yesterday’s Brazilian central bank meeting (at which the Selic rate was left at 13.75%) will disappoint those hoping for an interest rate cut at the next meeting in August. But the statement does …
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting have reinforced our view that the easing cycle will commence in July. We expect a cumulative of 200bp of cuts, to 9.25%, this …
20th June 2023
Brazil: shifting towards rate cuts? Expectations for interest rate cuts in Brazil have grown in light of recent developments, but, for now, we’re sticking with our view that Copom will hold off on lowering interest rates until November. The arguments in …
16th June 2023
The tightening of labour markets across Latin America in the past year or so has fuelled rapid wage growth in many economies and wage growth is likely to remain uncomfortably high for a while yet. Against this backdrop, even as central banks kick off …
15th June 2023
Petro crisis sparks rally in Colombian assets Colombia stumbles from political crisis to political crisis. After a major cabinet reshuffle in April, this week’s scandal included allegations of phone tapping and violation of campaign financing rules and …
9th June 2023
Industry struggling to sustain momentum from early 2023 Mexico’s industrial sector expanded by 0.4% m/m in April but this only partially reversed a sharp decline in March and suggests that the economy is struggling to sustain its momentum at the start of …
Overview – The region’s strong start to the year is unlikely to be sustained and we expect growth across Latin America to come in weaker than most expect this year and next. Inflation will continue to fall, but core price pressures are likely to remain …
8th June 2023
Inflation drops, but rate cuts still some time away Headline inflation in Mexico dropped to a 21-month low of 5.8% y/y in May and will continue to decline over the coming months. That said, the strong labour market and rapid wage growth mean that …
This webpage has been updated with a table and chart of key data Inflation hits multi-year low, but rate cuts still some way off The fall in Brazilian inflation to 3.9% y/y in May, alongside the government’s new fiscal framework, has strengthened the …
7th June 2023
Colombia: baby steps towards sustainable growth Data out this week suggest that Colombia’s economy has started to undergo an adjustment process, albeit a gradual one. In an Update last week, we explained how Colombia’s unsustainably strong recovery had …
2nd June 2023
The latest data suggest that Brazil’s labour market isn’t softening as quickly as we and many others (not least the central bank) had anticipated. That’s keeping wage growth high and, while that may help to support growth in Q2, it will probably deter …
1st June 2023
A bumper jump in GDP, but signs of underlying weakness The breakdown of Brazil’s Q1 GDP figures suggests that the economy is not as strong as the staggering 1.9% q/q rise in output would suggest. Even so, the sharp rise in output has prompted us to revise …
Note: We’re discussing potential EM equity outperformance, monetary easing and “friend-shoring” in our next EM monthly online briefing on Thursday, 1 st June. Register here to join. Brazil’s fiscal framework gets strong support The approval of Brazil’s …
26th May 2023
This webpage has been updated with a table and chart of key data Inflation shows broader signs of easing The surprise fall in Brazilian inflation to 4.1% y/y in the first half of May, coming alongside this week’s approval of the new fiscal framework in …
25th May 2023
Note: We’re discussing potential EM equity outperformance, monetary easing and “friend-shoring” in our next EM monthly online briefing on Thursday, 1 st June. Register here to join. Colombia’s very strong post-pandemic recovery has come at the expense of …
Monetary policy to be kept tight despite falls in inflation Mexico’s headline inflation rate fell to a 20-month low of 6.0%y/y in the first half of May and is set to drop further over the coming months. That said, strong wage growth will keep inflation …
24th May 2023
The latest activity figures suggest that most Latin American economies held up better than we’d thought in the first few months of 2023. Mexico and Colombia made surprisingly strong starts to the year while Chile ’s economy appeared to be gathering some …
23rd May 2023
Ecuador: Political risks in the spotlight Ecuador’s political crisis escalated this week after President Guillermo Lasso invoked the “mutual death” clause, dissolving the National Assembly to dodge an imminent impeachment vote. This move triggers fresh …
19th May 2023
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
Mexico’s central bank held its policy rate at 11.25% at today’s Board meeting, bringing the tightening cycle to an end. But with inflation unlikely to return to target until late-2024, policy will probably stay tighter than most expect over the next …
18th May 2023
Growth in Chile’s economy accelerated at the start of the year, but the headline figure masks signs of pronounced weakness. We expect the economy to struggle over the coming quarters amid tight monetary policy and project a 0.3% contraction over 2023 as a …
Mexico’s economy has put in a decent performance over the past year or so, but we think that most of the factors that have supported robust growth have now run their course. Tight policy and a looming recession in the US mean that the economy is likely to …
17th May 2023
The stronger-than-expected Q1 GDP data from Colombia suggest that the risks to our forecast for the economy to expand by 0.8% over 2023 as a whole are skewed to the upside. That said, there were signs of underlying weakness in the data and we expect the …
16th May 2023
Some relief on the inflation front The past week or so has brought some positive news on the inflation front. Data from Brazil earlier today showed that the headline rate fell to a 30-month low in April. This followed data releases that showed falls in …
12th May 2023
Copom to stay hawkish despite inflation decline The sharp fall in Brazilian inflation, to 4.2% y/y last month, was encouragingly broad based among the sub-categories of the CPI basket. But we think the central bank will want to see more evidence that core …
The looming impeachment trial of Ecuador’s president Guillermo Lasso marks a further intensification of the country’s political crisis and suggests that the recent experiment with market-friendly governments is on borrowed time. There are lots of ways in …
10th May 2023
A stronger finish to Q1 The surprisingly strong 1.1% m/m increase in Brazilian industrial production in March suggests that the economy fared a bit better than we’d expected in Q1. The risks to our GDP growth forecast for this year of 1.0%, which had …
Inflation drops, but 25bp hike next week still more likely than not The drop in Mexico’s headline inflation rate, to 6.3% y/y in April, was broad-based and will provide some comfort to officials at the central bank that price pressures are finally easing. …
9th May 2023
Colombia: inflation worries taking centre stage We had warned a few weeks ago that Colombia’s central bank (BanRep) was too sanguine on inflation risks and this week’s communications suggest that policymakers are coming round to our view. At last …
5th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
4th May 2023
Brazilian policymakers gave a firm push back against any expectations for imminent monetary easing at yesterday’s central bank meeting, supporting our view that interest rates will be lowered a bit more slowly over the next 6-12 months than most expect. …
The surge in exports from Latin America's major economies in March suggests that the upside risks to our GDP growth and currency forecasts are building. But with advanced economies poised to fall into recession over the coming quarters, China's demand for …
3rd May 2023
Panic stations in Argentina Developments in Argentina have taken a(nother) turn for the worse over the past couple of weeks. March’s grim inflation print (of 104% y/y) alongside rumours of an imminent devaluation and plans to renegotiate the country’s IMF …
28th April 2023
Strength at start of 2023 unlikely to be sustained The 1.1% q/q rise in Mexican GDP in Q1 marked a pick-up from the end of last year, but a fresh slowdown is on the cards as a recession in the US and tight policy at home will take their toll. The outturn …
The replacement of Colombia’s market-friendly finance minister José Antonio Ocampo with a close ally of President Petro is likely to lead to a sell-off in Colombia’s financial assets when markets open later today. This is especially worrying given the …
27th April 2023
The raft of inflation data over the past couple of weeks will have provided some relief for Latin American central banks, with headline rates in most countries now on a clear downward trajectory. In Mexico this means that a final rate hike in May now …
26th April 2023
Food inflation spike finally at an end The drop in Brazilian inflation to a 30-month low of 4.2% y/y in the middle of April was mainly a result of a sharp decline in food inflation, which is at its lowest rate since the start of the pandemic. With core …
There’s little evidence (so far) that the surge in interest rate is leading to widespread debt servicing problems in Chile’s private sector, but there are pockets of vulnerability in the household sector. Although we don’t expect a wave of defaults in the …
25th April 2023
Fall in inflation unlikely to be enough to prevent a final 25bp rate hike The fall in Mexico’s headline inflation rate to an 18-month low of 6.2%y/y in the first half of April was broad-based and will provide some comfort to officials at Banxico that …
24th April 2023
Brazil’s new fiscal plans: taking a step forward Brazil’s government presented the new planned fiscal framework to congress this week and the expectations are that it will progress quickly to a vote. We covered the framework when it was first announced …
21st April 2023
Contraction in industry suggests Q1 was another weak quarter Brazilian industrial production fell for a third consecutive month in February and, while the latest surveys suggest that industry held up a bit better in March, the bigger picture is that Q1 …
19th April 2023
Lula’s 3.0: an inauspicious start Brazil’s president Lula marked his first 100 days in office this week and, while there’s been a bit more enthusiasm from investors for Brazilian assets in the past few days, there hasn’t really been much for investors to …
14th April 2023
Brazil’s inflation drops sharply, but won’t sway the central bank The plunge in Brazilian inflation last month, to 4.7% y/y, was driven by a sharp decline in food inflation; core inflation remains high and the headline inflation rate is set to rise again …
11th April 2023
Argentina-IMF: targets a hard ask A read between the lines of the IMF’s Fourth Review of Argentina’s $44bn Extended Fund Facility suggests that the deal could be starting to fray at the seams. To start with, the government and the IMF don’t appear to be …
6th April 2023
The Monetary Policy Report released by Chile’s central bank today revealed that policymakers are more concerned about inflation risks than we’d thought. We still think that Chile’s central bank will be among the first to start loosening monetary policy, …
5th April 2023
Pick-up in services inflation paves the way for final rate hike The further fall in Mexico’s headline inflation rate, to 6.9% in March, confirms that inflation is now on a clear downward trajectory. But services inflation is showing no signs of easing, …
The historic drought afflicting Argentina will cause a steeper contraction in GDP than most expect this year and intensify balance of payments strains by reducing export earnings to the tune of 2-3% of GDP. That will make it hard to meet the IMF’s …
Copom’s minutes will leave a sour taste for Lula The minutes from last week’s Copom meeting , released on Tuesday, will have dashed any hopes (not least in the government) that policymakers might turn to interest rate cuts any time soon. Three points …
31st March 2023
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . China and Brazil are taking steps to allow bilateral trade to be settled in renminbi rather than US dollars. The Brazilian branch of ICBC will …
