Week Ahead: Sustained Inflationary Pressures In Latin America Likely To Spur More Rate Hikes

• Brazil, Chile, and Mexico will release their consumer price inflation this week, and Fitch forecasts that price growth in February will likely remain well above their respective central banks’ target range, potentially accelerating to new multi-year highs, from 10.4% y-o-y, 7.7%, and 7.1%, respectively in January. 
• The recent Russian invasion of Ukraine will likely exacerbate inflationary pressures in H1 2022 in Latin America, as the region continues to face surging global commodity prices and modest domestic production, which have caused food and fuel prices to soar. 
• The agency expects that the Banco Central do Brasil, Banco Central de Chile, and Banco de México will remain hawkish and hike during their next rate-setting meetings in March. 
• Nonetheless, if inflation continues to surprise to the upside, Fitch will likely consider upward revisions to their 2022-year end interest rate forecasts if the central banks view their recent series of rate hikes to be insufficient in containing inflation.

 (Source: Fitch Solutions)