This week in Latin America: Inflation in Brazil, GDP in Argentina and interest rates in Mexico

RIO DE JANEIRO, BRAZIL – Important economic data for the region are expected this week. In Brazil, markets will be watching inflation in mid-March, which Bloomberg Economics economists Adriana Dupita and Felipe Hernandez say could show a slowdown.

In addition, Brazil’s central bank will release the minutes of the March Monetary Policy Committee meeting (where it decided to raise the policy rate by 100 basis points) and the first-quarter inflation report.

In Mexico, the central bank is expected to raise its key interest rate by 50 basis points to 6.5%. The country’s inflation is likely to remain above target in the first two weeks of March and would support further tightening, according to Dupita and Hernandez, who also said economic activity should pick up in January, pointing to a recovery in GDP in the first quarter.

Elsewhere, in Argentina, fourth-quarter GDP is expected to confirm double-digit growth for 2021.

BRAZIL

Tuesday, March 22.

The minutes of the March monetary policy meeting will be released this Tuesday, which would give the central bank an opportunity to clarify the confusing message it delivered after the meeting, in which the promise of another 100 basis point rate hike in May and the statement that it would be willing to raise rates further if needed were countered by other dovish messages.

Thursday, March 24

On Thursday, the Brazilian Central Bank’s inflation report for the first quarter will be released. According to Dupita and Hernandez, the bank is expected to revise upward its estimate of neutral interest rates and confirm that the output gap remains negative despite GDP growth in the fourth quarter. The report will also include the latest data on financial conditions.

Friday, March 25

Inflation data for March will be released on Friday. Dupita and Hernandez expect headline inflation to slow after rising in late February, as pressures from education costs and the double-digit fuel price increase announced on March 11 ease.

ARGENTINA

Wednesday, March 23.

GDP data for the fourth quarter are due Wednesday. Compared to the same period in 2020, household consumption (10.6%), investment (17.1%), exports (21.2%), and imports (16.8%) are expected to grow by double digits. On the other hand, Bloomberg Economics economists estimate a slower but significant increase in government consumption (8.9%).

If confirmed, growth would be 10.3% in 2021, after a decline of 9.9% in 2020, which would also bring GDP to its highest level since the first quarter of 2018, before the collapse that led Argentina to request the IMF loan.

MEXICO

Thursday, March 24.

Fortnightly consumer price inflation will be released this Thursday. It is expected to have fallen to 7.20% in the first two weeks of March from 7.34% in the second half of February, economists estimate, also suggesting that core inflation will remain largely unchanged.

Retail sales for January will be released on the same day and are expected to rise 5.9% year-on-year in January, following 4.9% growth in December.

According to independent data cited by Bloomberg Economics, vehicle sales fell to 78,585 units in January and imports of consumer goods rose to $3.85 billion in January from $3.18 billion a year ago.

Also on Thursday, the monetary policy meeting is expected and the central bank is expected to raise its key interest rate by 50 basis points to 6.5%, keeping the door open for further hikes depending on new data. The risks for another rate hike are more to the upside.

Friday, March 25

On Friday, the economic activity index for January will be released, which is expected to have increased by 1.82% year-on-year in January. The data suggest a slight increase from the previous month, the third in a row. Activity will remain below potential and below pre-pandemic levels. The data point to an increase in GDP in the first quarter, after remaining unchanged in the fourth quarter of 2021.

With information from Bloomberg in linea