Publications

In recent months, the main feature of the global economic outlook has been the increase in uncertainty. The erratic tariff policy of the American administration and the lack of precedent for recent protectionist shocks have made reading the economic outlook complicated.

The most interesting thing about last week’s ECB meeting was not the decision made, but the promise of hints as to what it might do next. Ultimately, the 25-basis point cut in the main reference rates had already been widely priced in by analysts and markets.

The last months of 2024 gave some glimpses of the challenges Latam could face in the coming years. However, looking beyond the first quarter of 2025, some—albeit not all—of these warning signs have faded.

GDP growth is expected to slow to 1.6% in 2025 and 1.8% in 2026, following three years of around 3% growth. The slowdown will be driven by tighter monetary conditions, a weaker fiscal impulse, and a less favorable global context, though the primary sector and labor market resilience will provide support.

The latest meetings of the Federal Reserve (Fed) and the European Central Bank (ECB) have confirmed what was expected: that monetary policy in both regions is starting to diverge.

Diverging monetary policy between China and the US remains after Trump’s victory, leading to a longer time China-US policy rate reversion.

The Board of Banrep reduced its monetary policy rate by 25 bps, bringing it to 9.50%. This decision was split: 5 members in favor of the 25 bp reduction, one in favor of a 50 bp reduction and one in favor of a 75 bp reduction. This is an important change in the Board's stance, after 6 meetings with rate cuts of 50bp.

2024 has been less challenging for central banks as the disinflation process consolidates, building confidence in achieving the 2% inflation target. In 2025, the challenges will be greater and the debates more intense.