Latin American: Monetary Tightening Nearing the End of the Cycle - BBH

Latin American: Monetary Tightening Nearing the End of the Cycle - BBH

According to analysts from Brown Brother Harriman, the tightening cycle of monetary policy in Latin America is nearing the end.

Key Quotes:

“Easing cycles in Asia and EMEA stand in stark contrast to the tightening cycles seen in Latin America. Currency weakness played a large role in the high rates of regional inflation, as Latin America was the hardest hit region in terms of lower commodity prices. As such, the monetary tightening has been even more painful (but necessary to help tame inflation).”

“This is the last of our monetary policy outlooks for the different EM regions. Brazil was the first to tighten, and will likely be the first to ease this year. We believe most others in the region are nearing the end of their tightening cycles, but it’s too early to talk about easing yet.”

“Colombia - The central bank is in the midst of a tightening cycle that started in April 2014. Since then, there has been total tightening of 325 bp that took the policy rate to 6.5%. However, inflation continues to rise (…) Next policy meeting is April 29, and another 25 bp hike to 6.75% is expected then.”

“Mexico - The central bank is in the midst of a mini-tightening cycle but has been on hold since the last intra-meeting emergency 50 bp hike to 3.75% in February (…) Barring a significant collapse in the peso, we think the tightening cycle is over for the time being.”