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Latin Inflation On Course to Reach Targets: More Cuts to Follow

Inflation in key Latin American economies has continued to decline in January, with the exception of Mexico. The data released for January largely met expectations.

While Colombia's CPI, at 8.35%, remains significantly above its target, inflation in the other four countries has already neared the upper bounds of their inflation targets. However, inflation in Mexico has recently increased, which will likely lead the Bank of Mexico (Banxico) to maintain its current policy stance at Thursday's meeting. Meanwhile, Peru is anticipated to cut its rates by 25 basis points, given that inflation has hit the upper target of 3% and economic activity remains subdued following last year's social unrest, which severely affected growth.

Our Take: The data, aligning with expectations, supports the likelihood of further rate cuts by Latin American central banks. While Mexico might still hold rates steady, it could consider rate adjustments later on, given that inflation is nearing its target.


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