Mexico and Colombia are likely done with monetary tightening, while Brazil and Chile may soon be looking for an chance to cut interest rates, according to Goldman Sachs Group Inc.
(Bloomberg) — Mexico and Colombia are likely done with monetary tightening, while Brazil and Chile may soon be looking for an chance to cut interest rates, according to Goldman Sachs Group Inc.
“The only two policy-active central banks during March to April, Colombia and Mexico, will most likely by end-May also be looking at peak-rates,” Alberto Ramos, Goldman’s chief Latin America economist wrote in a research note published Friday. “Central banks that have been on hold for longer, Brazil and Chile, could instead soon be looking for a window of opportunity to responsibly and credibly start to reduce the level of monetary policy restrictiveness.”
Inflation has slowed across the region but the drop “is still insufficient to make the monetary authorities comfortable, particularly against a backdrop of still-moored inflation expectations and high policy risk premia,” Ramos said.
Latin American policymakers aggressively raised rates over the last two years as prices soared when demand rebounded from pandemic lockdowns. That helped tame inflation, but convergence toward price targets is likely to be slow, so central bankers will be cautious about cutting rates, according to Ramos.
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