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Marina Conesa
Marina Conesa
Latin America

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In Brazil inflation surprised to the upside; we revised our forecast for inflation upwards at the end of 2016 to 6.8%, but we continue to see the Selic stable at 14.25% for a long period. In Colombia El Niño drives up inflation; we expect a downward trend in inflation over the course of the year although not enough to return it to the target band by the end of the year.
Banxico maintained the MPR unchanged as expected, but the tone turned restrictive given the short-term inflation risks and others derived from a worsening economic outlook. Colombian exports dropped, due to the fall in oil prices and lower external demand. Today we will see inflation figures for Brazil and Colombia, economic activity in Colombia and confidence in Mexico.
The central bank’s communication suggests that US MP remains an important factor in its decisions, despite concerns arising on currency depreciation that could lead to high inflation. We expect the next rate hike in 2Q16 in line with the Fed, since risks to financial stability have not materialised. Exports are expected to fall in Colombia, pressuring the CA deficit.