Latin America Inflation Threat Sparks More Hikes: Green Week
(Bloomberg) – Latin America’s fight against soaring consumer prices is expected to shift to a new front this week, with Colombia set to become the region’s fifth-largest economy under a targeting regime. inflation aimed at tightening monetary policy.
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Bogota’s central bank is almost certain to join its peers on Thursday and deliver its first hike in five years. Around the same time, the Banco de Mexico is expected to rise for a third consecutive meeting after inflation surged in mid-month.
Long a threat to the region, inflation fell in Latin America last year as the coronavirus ravaged demand and production, prompting central banks to aggressively cut interest rates. At one point in 2020, annual consumer price increases in all five economies were less than 3%, and until the fourth quarter, all were in or below the target range.
Now, with the pandemic easing and economies reopening, inflation has risen again, forcing policymakers in Brazil, Chile, Mexico and Peru to quickly turn the tide and start tightening cycles. .
Brazil’s central bank, which was the first to react, is the most advanced. He pushed the Selic rate up 425 basis points, from a record high of 2% to 6.25%, most recently with a full point hike. Chile and Peru have both raised in each of their last two meetings, with more movements to come.
Tariff decisions in Latin America are among at least 12 expected around the world over the coming week. A new leader in Japan, German election results, multiple appearances by Group of Seven central bankers and further acceleration in consumer price growth in the eurozone will also be among the highlights.
What Bloomberg Economics Says:
“A series of inflation figures for September in the eurozone will almost certainly sound the alarm bells next week. Prices are accelerating rapidly and soaring energy costs and bottlenecks will only add to the pain. “
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Click here to find out what happened over the past week and here’s our recap of what’s happening in the global economy.
In the United States, investors will be watching the latest data on durable goods orders and pending home sales.
Several Federal Reserve policymakers will be in the speaking circuit, giving their views on the economy after the central bank’s latest move to keep rates close to zero, but signaling that it is preparing to cut back on its purchases of ‘obligations.
Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen are expected to testify before Congress on Tuesday and Thursday on the state of the pandemic recovery.
A new leader will emerge in Japan this week. The vaccine czar and reformist Taro Kono seems to have the advantage over three rivals, including, for the first time, two women. Given the complicated dynamics of the ruling party, however, the result is far from clear.
The first task of the winner, who will almost certainly become Prime Minister, will be to put in place a stimulus plan to revive an economy still in a state of emergency. Factory output, retail sales and the Bank of Japan‘s Tankan business climate survey will provide a measure of the task ahead.
South Korea’s trade figures will be closely watched on Friday for the latest indication of the delta’s impact on global trade.
Thailand sets interest rates on Tuesday, and China’s PMI report for September will be closely watched on Thursday amid growing signs that a nationwide crackdown on the real estate sector is holding back growth.
Europe, Middle East, Africa
Another busy week will begin with the aftermath of the German elections. After Sunday’s vote, marking Angela Merkel’s regime change in Chancellery, coalition talks could take weeks, if not months.
Several central banker appearances will take place in the coming days, starting on Monday with European Central Bank President Christine Lagarde testifying to lawmakers and Bank of England Governor Andrew Bailey delivering a speech to economists.
The ECB’s response to the Fed’s annual Jackson Hole rally begins on Tuesday. Normally held in the Portuguese retreat in Sintra, the event will be online for a second year. Powell, Bailey and BOJ chief Haruhiko Kuroda will all speak, as will ECB officials including Lagarde.
Among the key figures in Western Europe, inflation in Germany on Thursday and for the euro zone on Friday should prove particularly interesting.
The German rate is estimated at just under 4%, which would be a record since the start of its series of indices to European standards in 1997. In the euro area, economists predict that price growth will reach 3.3 %, the fastest since 2008.
In the Nordic region, a speech by Riksbank Governor Stefan Ingves on Tuesday and the report on last week’s monetary decision due Thursday will gain momentum after a surprisingly conciliatory outcome, where officials do not anticipate d ‘predictable rate increases.
On the other hand, the Czech central bank is ready to continue its rise. The authorities could accelerate the tightening, by raising the benchmark rate by half a point to 1.25% to combat the surge in inflation.
Multiple monetary decisions are also taking place across Africa. Ghana’s central bank will likely keep its rate at its lowest level in nine years to revive an economy that grew at a slower pace than expected in the second quarter.
Angolan policymakers could also remain on hold after announcing a 450 basis point hike in July. Kenya’s central bank will likely keep its rate unchanged for a 10th meeting in a row as the pandemic and a drought weigh on economic output.
In North Africa, Morocco is expected to leave its benchmark interest rate at a historically low level as new IMF reserves bolster the kingdom’s foreign exchange reserves, while Tunisia could also opt for caution and stay on hold. .
Unemployment data for next week will show whether the Saudis continue to withdraw from the workforce. This is an unfortunate trend for the crown prince of the kingdom, who has placed job creation for young people at the center of his agenda.
Back to Latin America: In addition to the decisions of central banks in Colombia and Mexico, other such meetings in the region this week are those in Guatemala, the Dominican Republic, Trinidad and Tobago and Uruguay , which raised its key rate in August.
Data expected in the region this week could show that the slowdown in the Mexican economy in June continued into July, while its unemployment rate rose for a third month in August. The proxy reading of Argentina’s GDP likely rose for a second month in July as the economy reopened and restrictions eased.
In Brazil, meanwhile, look for data on Thursday to show its broadest measure of inflation fell to a 2021 low in September while unemployment also fell back to 2020 levels, although both are working. always at a double-digit rate. The central bank is releasing the minutes of last week’s meeting on Tuesday.
Chile is expected to post six separate demand and output indicators indicating an overheating economy, with August’s reading of its GDP proxy indicator closing the week.
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