Publications

We enter a new data-dependent phase in which the Board monitors core inflation before signaling it may lower the ex-ante real policy rate close to the 2.7% midpoint of its estimated neutral range.

We think the room to continue easing is unlikely to have been materially affected by the Fed’s more cautious tone from last week, as some Board members have indicated that a narrowing rate spread is not a binding constraint.

The Central Bank kept its policy rate at 9.25% for the fourth consecutive meeting, a decision reflecting caution amid persistent inflation risks and the ongoing economic recovery.

Before the meeting, we already saw scope for fewer cuts than the three currently penciled in for 2026. Following today’s meeting, we now hold a stronger bias toward fewer rate cuts ahead.

Treasury yields fell over the past month as futures almost fully price in a second straight rate cut next week, after Powell warned last week that the labor market may now be at a stage where “further declines in job openings might very well show up in unemployment.”

The CBRT reduced the policy rate by 100bps to 39.5%, parallel to the majority of the rate cut expectations of 100-150bps, with also a similar size of cuts in the corridor (38%-42.5%). We still maintain the view of gradual rate cuts going ahead, yet with increasing inflationary pressure.

In the midst of a year of global uncertainty, both due to economic and geopolitical factors, Latam has shown a particular resilience that has manifested itself in the appreciation of its currencies and the reduction of its risk premiums.