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Latin America CPI Update: Chile and Brazil See Further Inflation Cooling, While Mexico's Rates Rise

Brazil's inflation has decelerated for the third consecutive month to 4.62% year-over-year, slightly above the expected 4.55%. This supports the ongoing monetary easing, with two additional 50 basis point cuts anticipated by the end of March. Annual inflation has reduced from its mid-2022 peak of over 12%. Core inflation, which omits volatile items like food and energy, is nearing the central bank's 2024 target of 3% (plus or minus 1.5%).

In Chile, consumer prices saw their largest monthly decrease since 2013, falling 0.5% last month and bringing annual inflation down to 3.9%. The inflation rate has significantly dropped from 2022's highs above 14%, aligning closer to the 3% target. Price declines were widespread, with 10 of the 12 categories monitored by the national statistics agency showing reductions.

Conversely, Mexico experienced a higher-than-anticipated rise in consumer prices in December, fueled by holiday spending. Prices increased year-over-year to 4.66%, up from November's 4.32% and surpassing the 4.57% consensus forecast. Core inflation slowed to 5.09% from November's 5.3%, below the predicted 5.15%.

Our Take: The declining inflation across Latin America is promising and likely to lead to aggressive rate cuts by regional central banks. Chile's central bank, in particular, seems poised to quicken its easing pace at this month's meeting.


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