The International Monetary Fund (IMF) predicted that interest rates in Latin America will likely stay high until mid-2024, pointing to rising wages and food prices in the region.
From a peak of 10% in May 2022, headline inflation within the region (excluding Argentina and Venezuela) decreased to 7% in March. Nevertheless, the dip is mostly attributable to the collapse in commodity prices on the global market.
Despite the price drop, the IMF observed that groceries still take a considerable chunk of household income for the majority of the region’s population.
The IMF expects Latin America’s economic growth would slacken to 1.6% this year from 4% growth in 2022.
In a blog post, IMF analysts Gustavo Adler and Nigel Chalk recommended that regional nations reduce their budget deficits in order to alleviate the cost of living problem.
“Labor markets are tight, with employment firmly above its pre-pandemic levels. At the same time, the output is at or above potential, and short-term inflation expectations exceed central banks’ target ranges,” the analysts wrote.
Over the last 15 months, most central banks in the regions have ramped up interest rates, with hikes being constant.
The approach has been the target of criticism by several political leaders. Brazilian President Lula Da Silva and Colombian President Gustavo Petro (both of them left-aligned) have chastised their respective central banks for the constant rate hikes.
Add comment