Inflation in Latin America begins to subside

First modification: 06/09/2023 – 19:49

Annual inflation in Brazil, the largest economy in Latin America, hit several milestones in May: it hit its lowest level in more than two years, fell below 4% for the first time since late 2020, and slowed more than expected. .

The figure, 3.94% according to the IBGE statistics agency, also leaves the country standing very well among its neighbors, where annual inflation varies depending on the case, within a huge gap that goes from 1% to exceeding 400%.

Some analysts have attributed the situation to a tight monetary policy, with interest rates at levels high enough to help moderate consumer demand and reduce pressure on prices.

In this country, the Central Bank has maintained its reference rate at 13.75% since September, but the new inflation figures are likely to add weight to calls by the government of Luiz Inácio ‘Lula’ da Silva to reduce them from a maximum of six years.

Few countries maintain double-digit inflation

With the exception of Argentina, the Latin American countries have taken a slight breather from inflation. However, they are far from the objective of central banks, which usually work under the pressure of an annual range of between 2% and 4%.

Colombia is the only one that remains in double digits, only after Venezuela and Argentina, while Chile, Peru and Uruguay still deal with the highest level in years. Mexico and Brazil are in a non-negligible range and in Costa Rica it is less than 1%, its third lowest figure in ten years.

With an inflation outlook still far from the goals, the World Bank estimates that Latin America will grow only 1.5% in 2023, an advance well below the 3.7% registered last year. The drop in the price of raw materials and the effects of interest rate rises to control the rise in prices are among the causes.

With Reuters and EFE