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This page has been updated with additional analysis since first publication . Soft inflation print brings 50bp rate cut into play The Brazilian July mid-month inflation reading of 3.2% y/y suggests that price pressures are weaker than we and most others …
25th July 2023
The region’s strong start to the year is unlikely to be sustained and we expect growth in 2024 to come in weaker than most expect. Inflation has come down a long way and price pressures should continue to ease over the coming months, paving the way for …
24th July 2023
This page has been updated with additional analysis since first publication . Fresh rise in services inflation likely to raise concerns at Banxico Mexico’s headline inflation rate eased further in the first half of July but the fresh rise in services …
Argentina continues to dodge exchange rate issue An Argentine delegation travelled to Washington this week in a bid to close negotiations with the IMF on the fifth review of the country’s $44bn Extended Fund Facility (and, according to local media, to …
21st July 2023
Mexico’s exports have fared well recently and the current account deficit remains small. But a closer look suggests that the strength of the peso is causing dynamics in the balance of payments to worsen. The Mexican peso has been one of the best …
20th July 2023
Table 1 has been updated to include the latest comments and proposals of the candidates. The latest polls ahead of next month’s primaries in Argentina suggest that the country could buck the regional trend by electing a more market-friendly government. In …
19th July 2023
The large macroeconomic imbalances that built up during Chile’s post-pandemic recovery have eased substantially, which is likely to prompt the central bank to deliver more rate cuts than almost any other EM central bank over the next couple of years. We …
17th July 2023
Colombia’s fiscal watchdog sounds the alarm bell Concerns about Colombia’s public finances have re-emerged this week after the country’s Autonomous Fiscal Rule Committee (CARF) warned that the government is unlikely to comply with the fiscal rule in the …
14th July 2023
Note: We’ll be discussing macro and market risks around El Niño’s return in a 20-minute briefing on Wednesday, 19 th July. Click here to register. The likelihood of an El Ni ño event over the second half of the year raises the risk that activity is …
13th July 2023
Industry now fully recovered from March drop The stronger-than-expected 1.0% m/m rise in Mexican industrial production in May means that the sector has now reversed all of the decline in output recorded in March. And more timely indicators point to a …
12th July 2023
This page has been updated with additional analysis since first publication. Inflation plunge seals the deal on an August rate cut The sharp fall in Brazilian inflation to just 3.2% y/y last month makes it almost certain that the central bank will kick …
11th July 2023
Survey data point to decent end to Q2 The batch of survey data for June from Brazil and Mexico released this week suggest that both economies gathered momentum at the end of Q2. In Brazil, having fallen back in May, the FGV confidence surveys generally …
7th July 2023
Fall in Chilean inflation paves the way for start of easing cycle later this month The larger-than-expected decline in inflation in Chile to an 18-month low of 7.6% in June seals the deal on an interest cut at the central bank’s next meeting later this …
We expect the Brazilian real to reverse its gains against the US dollar by the end of the year as Brazil’s central bank eases policy and risk sentiment deteriorates. Although it has fallen a bit over the past few weeks, the Brazilian real has risen nearly …
6th July 2023
The surge in Brazil’s exports since the start of the pandemic has helped the economy recover more quickly than we and most others had anticipated. And unlike previous spikes in exports, some of the windfall has been saved, which has caused the current …
Industry struggling in Q2 The weaker-than-expected 0.3% m/m rise in Brazilian industrial production in May only partly reverses April’s 0.6% m/m decline and suggests that industry remained weak over the course of the second quarter. At the margin, this …
4th July 2023
BCB: A parsimonious process The minutes to last week’s Brazilian central bank meeting made waves, revealing that a majority of Copom members expect to lower interest rates at the next meeting in August. We had thought the more cautious tone of the …
30th June 2023
It’s been a good month for Latin American currencies, particularly the Brazilian real and the Colombian peso, which should help the disinflation process across the region. This is one reason behind the recent dovish shift by the region’s central banks. …
27th June 2023
This page has been updated with additional analysis since first publication . Easing cycle to kick off in August The fall in Brazilian inflation to just 3.4% y/y in the first half of this month, coupled with the surprisingly dovish tilt on Copom shown in …
BRL rally for real? The Brazilian real’s recent rich vein of form has continued this week, with the currency appreciating by a further 1.5% against the dollar, to 4.8/$. Several factors have supported this, including improvements in Brazil’s trade balance …
23rd June 2023
Banxico stands pat as inflation drifts lower The further falls in headline and core inflation in recent months prompted Mexico’s central bank to leave its policy rate on hold at 11.25% at today’s Board meeting, but we doubt that monetary loosening will be …
22nd June 2023
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 …
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
