MONETARY POLICY NORMALISATION CONTINUES...
- ...DESPITE A BAD START TO Q1 FOR INFLATION, DUE TO EL NIÑO
Andrés Abadía (Chief LatAm Economist)Latin America
- Disinflation continues in Mexico, and the near-term outlook remains benign according to survey data.
- The Q4 GDP report confirms activity was under pressure, due to a range of domestic and external drags.
- Tighter financial conditions are the main issue, but the numbers allow Banxico to start cutting in March.
Andrés Abadía (Chief LatAm Economist)Latin America
- Mexico — Protests against AMLO, but…
- Colombia — Superpowers for President Petro?
- Peru — Cabinet changes to present a new image
Andrés Abadía (Chief LatAm Economist)Latin America
- Data to be released in coming days will likely confirm that the Mexican economy struggled in Q4.
- If core disinflation continues as we expect, Banxico will start to cut rates next month.
- Argentina’s economy is under pressure, but some good news is emerging, particularly on fiscal issues.
Andrés Abadía (Chief LatAm Economist)Latin America
- December’s IBC-Br confirmed that activity in Brazil ended Q4 strongly, but with some caveats.
- Still-elevated real rates are holding back the upturn in private consumption; COPOM will have to cut more.
- Peru had a poor end to the year, but low inflation and looser monetary conditions will support growth in H1.
Andrés Abadía (Chief LatAm Economist)Latin America
- Brazil — Sluggish start to the year as headwinds bite
- Mexico — Inflation, Banxico and the Fed
- Colombia — Reduced political risk is a boost, for now
Andrés Abadía (Chief LatAm Economist)Latin America
- Industrial production growth in Mexico slowed sharply towards the end of last year.
- Some leading indicators point to still-difficult times ahead; external conditions will remain a drag in H1.
- The miserable inflation story continues in Argentina but is finally showing signs of improvement, just.
Andrés Abadía (Chief LatAm Economist)Latin America
- Rapid disinflation in Colombia is paving the way for bigger rate cuts from a still-cautious BanRep.
- The effect of El Niño and the large minimum wage increase will be offset by sluggish domestic demand.
- Consumer confidence is on the mend, thanks to the COP’s resilience, lower inflation and interest rates.
Andrés Abadía (Chief LatAm Economist)Latin America
- Peru’s BCRP cut the policy rate by the usual 25bp to 6.25%, as inflation continues to fall rapidly.
- The Bank has ample room for manoeuvre, but bolder action is limited for now by the PEN sell-off.
- Sluggish economic growth and challenging external conditions are testing the country’s fiscal resilience.
Andrés Abadía (Chief LatAm Economist)Latin America
- The El Niño effect is pushing prices of key foods higher, but core pressures remain under control.
- Brazil’s disinflation is on track, despite the headline number surprising to the upside in January.
- Food prices are also causing trouble in Chile, and methodology changes have led to elevated noise.
Andrés Abadía (Chief LatAm Economist)Latin America
- Brazilian Real — Fundamentals supportive
- Colombian Peso — Shielded by high carry
- Chilean Peso — Lower carry still the key drag
Andrés Abadía (Chief LatAm Economist)Latin America
- Brazil’s industrial sector is strengthening, but the devil is in the detail; bold rate cuts are needed.
- The external balance improved substantially last year as exports were resilient and imports struggled.
- The minutes of the last policy meeting point to a cruising speed of 50bp rate cuts in the near term.
Andrés Abadía (Chief LatAm Economist)Latin America
- Chile’s BCCh cut the policy rate by 100bp to 7.25%, with one member voting for a bigger reduction.
- The Board increased the pace of easing as inflation is falling rapidly and the economy is struggling.
- The worst for the economy is over, but temporary shocks—including bad weather—remain drags.
Andrés Abadía (Chief LatAm Economist)Latin America
INFLATION CONTINUES TO FALL AND GROWTH IS SLUGGISH...
- ...ALLOWING GRADUAL INTEREST RATE CUTS
Andrés Abadía (Chief LatAm Economist)Latin America
- Rapid disinflation is allowing LatAm central banks to normalise monetary policy, but speeds differ.
- Brazil’s COPOM cut rates at a cautious 50bp pace, but we still see room for bolder cuts if the Fed blinks.
- The unemployment rate ended Q4 on a decent footing, but we see a slowdown in job creation in H1.
Andrés Abadía (Chief LatAm Economist)Latin America
- Real GDP growth in Mexico surprised to the down-side in Q4; tighter financial conditions are hurting.
- will be difficult in H1, with less support from the global economy and Banxico still cautious.
- Chile’s labour market performed well in December; further interest rate cuts will support the upturn.
Andrés Abadía (Chief LatAm Economist)Latin America
- In December, Mexico saw its biggest trade surplus since the pandemic, and the oil trade deficit stabilised.
- Auto exports improved at the margin in Q4, but down- side risks remain, due to sluggish external conditions.
- Will the strength of the labour market in 2023 continue over the coming quarters?
Andrés Abadía (Chief LatAm Economist)Latin America
- Economic activity in Mexico is struggling, particularly manufacturing and key services, as demand eases.
- The ongoing weakness of global conditions and high real interest rates will constrain growth during H1.
- Bad weather has foiled a promising disinflation story, though core pressures continue to ease rapidly.
Andrés Abadía (Chief LatAm Economist)Latin America
- The IBC-BR for November shows Brazil’s economy is stagnating, despite rapidly falling inflation.
- Tight financial conditions will continue to keep a lid on activity, offsetting the boost from fiscal support.
- Business surveys are improving, signalling better momentum in Q2, if the COPOM acts boldly.
Andrés Abadía (Chief LatAm Economist)Latin America
- Colombia’s economy performed relatively well in November, and the outlook is improving; just.
- S&P lowered the country’s outlook to ‘negative’ from ‘stable’ due to the sluggish economic growth.
- A rating downgrade will likely be avoided, but President Petro’s policy missteps are a real threat.
Andrés Abadía (Chief LatAm Economist)Latin America