Weekly Agenda: Interest rates in Brazil and Chile; inflation in Peru, Chile and Colombia (Week 18)

RIO DE JANEIRO, BRAZIL – This week, the markets will pay attention to the most important economic data in the region. The highlight will be the Central Bank’s monetary policy meeting in Brazil.

Some economists believe that the yield curve shows that the central bank will keep its promise to raise the key interest rate by 100 basis points.

Also, in Brazil, March industrial production and April trade balance data are expected, and February economic activity and budget results were postponed because of a strike at the central bank.

Elsewhere, in Argentina, the main focus will be on the central bank’s survey of economists forecasts, which will be released Friday. On the other hand, Chile’s central bank is expected to continue its tightening cycle at a more moderate pace, raising the key interest rate to 8.0%.

Minutes from the central bank’s April meeting should support expectations of further tightening. In Colombia, inflation is expected to continue its upward trend in April. And in Peru, inflation is expected to rise again in April.

BRAZIL

The economic index for February will be released on Monday, May 2. Experts expect a slight increase in activity, but not enough to offset the 1% decline in January.

This would make the three-month average of this indicator (a proxy for GDP) 0.1% higher than the previous three months and 0.5% above the previous year’s level.

The primary budget balance for February will also be published on the same day. According to economists, the primary sector is expected to show a moderate deficit, with the central government’s deficit offsetting an expected surplus of regional governments so that the 12-month primary surplus would remain at about 1.2% of GDP.

On Tuesday, May 3, industrial production data will be released, likely ending the first quarter on a “weak note.” Economists expect a month-on-month and year-on-year decline in March.

A tightening of financial conditions would exacerbate supply chain problems that have plagued the sector for several quarters.

Also, on Tuesday, the trade balance for April will be released. A seasonal increase in exports is expected to provide a significant trade surplus. Rising commodity prices are driving up both export and import prices.

The monetary policy meeting will be held on Wednesday, May 4. The Brazilian Central Bank is expected to raise the key interest rate by 100 basis points, as it announced after the March meeting.

This would put the Selic at 12.75%. Although this figure is only slightly above the 1% annual inflation rate of mid-April, it exceeds the inflation forecast for the next 12 months by about seven percentage points.

COLOMBIA

The monetary policy meeting minutes will be released on Tuesday, May 3. They are expected to provide more details on the central bank’s decision to raise rates by 100 basis points to 6.00% at its April meeting and additional information on the outlook for monetary policy. Economists say they are likely to expect further rate hikes.

On Thursday, May 5, the inflation rate for April is expected, which probably increases to 8.66% from 8.53% in March due to higher food prices.

The government has increased subsidies to keep fuel prices stable, but utility and transportation prices may continue to rise.

CHILE

On Monday, May 2, the economic activity index for March will be released and is expected to rise 6.7% year-on-year, following a 6.8% increase in February.

The result would mean that activity remains above pre-pandemic levels and potential. Mining would have risen 4.0% month-over-month after falling in the previous four months; manufacturing, meanwhile, would have risen 2.9%.

On the other hand, retail sales, services, and construction would have declined.

The monetary policy meeting is scheduled for Thursday, May 5. Economists Dupita and Hernandez expect the central bank to raise the policy rate by 100 basis points to 8.0%.

This would be less than the 150 basis point hikes at each of the previous two meetings but more than the last 50 basis point hike the central bank hinted at in its March quarterly outlook.

April inflation is due on Friday, May 6. It is expected to have risen to 9.8% from 9.4% previously, still above the target ceiling of 3.0% +/- 1 percentage point. Excluding food and energy prices, inflation could rise to 7.7% from 7.4% previously.

MEXICO

Gross fixed capital formation data for February are due on Friday, May 6. According to experts, it is expected to have increased by 4.1% year-on-year in February, compared with 8.6% in January.

The data suggest that investment declined after previously rising 2.2% month-over-month. Investment would remain below pre-pandemic levels given the government’s restrictive fiscal and monetary policies and nationalist agenda.