Weekly agenda: Mexican and Peruvian interest rates; inflation in Brazil and Argentina (Week 19)

RIO DE JANEIRO, BRAZIL – This week, market attention will turn to several important data for the Latin American economy. In Brazil, the focus will be on the minutes of the May 4 monetary policy meeting and inflation data for April. Retail sales will also be published.

In Argentina, the central bank will likely accelerate its tightening cycle by raising the key interest rate to 7.25% from 6.5%. The inflation rate for April will be published, which will be crucial as a rise could trigger an interest rate hike.

In Mexico, inflation is also expected to continue its upward trend in April and could further exceed the target, according to market observers.

Meanwhile, in Colombia, industrial production and retail sales for March will be released, indicating continued economic recovery.

In Peru, the central bank may be ready to slowly raise interest rates despite the risk of a lag.

Experts expect it to raise its key rate by 50 basis points to 5.0% and reaffirm its plans for further rate hikes.

ARGENTINA

The inflation rate for April will be released on Thursday, May 12. Experts expect core inflation to be slightly below headline inflation. Rising food prices and transportation costs have likely led to another inflated inflation rate.

BRAZIL

In the statement released after raising the policy rate by 100 basis points to 12.75%, the central bank indicated that another “smaller” hike was likely at its June meeting but did not clarify whether this would be the last move in the cycle or what would trigger an end to the cycle. The monetary policy meeting minutes will be released on Tuesday, May 10. The minutes may provide information on this.

Retail sales for March are expected on the same day. Observers expect an overall decline to wipe out some of the previous month’s gains. This would be in line with the deterioration in financial conditions and the retail and consumer confidence reduction in March.

Economists expect monthly inflation to fall slightly, but the outlook remains gloomy. The inflation rate for April will be released on Wednesday, May 11. Food inflation is expected to slow but remain above 1% for the month.

March services volume will be released on Thursday, May 12. Services are likely to increase as the impact of the omicron fades, offsetting some of the declines in the previous two months.

COLOMBIA

Retail sales for March will be released on Friday, May 13. They are expected to have risen 6.9% month-on-month, up sharply from 4.9% in February.

Sales would have benefited from a one-day sales tax holiday. The results would align with the resilience of household consumption and central bank concerns about solid credit growth.

On the same day, industrial production data for March will be released, which probably rose 5.4% year-on-year, compared to 7.5% in February. According to economists, economic activity benefits from increasing domestic demand and higher commodity prices.

CHILE

On Monday, May 9, the trade balance for April will be released, which will likely show a surplus of about US$563 million, according to experts.

This compares with surpluses of US$1.264 billion in March and US$2.362 billion a year earlier.

The decline in exports would explain the month-over-month difference, and the increase in imports would explain the year-over-year change.

MEXICO

The inflation rate for April will be released on Monday, May 9, and is expected to rise to 7.77% from 7.45% in March. According to market observers, most of the increase is likely to be due to core inflation, with the acceleration of energy prices also contributing.

On Thursday, May 12, industrial production for March will be released, which is expected to have increased by 1.9% year-on-year, after 2.5% in February and 4.3% in January.

According to preliminary GDP figures, the average growth in the first three months would be in line with the 2.9% year-on-year increase in the industry in the first quarter.

On the same day, the monetary policy meeting will be held. The central bank is expected to raise its key interest rate by 75 basis points to 7.25%, opening the door for further increases.

Rising inflation and inflation expectations despite the rate hike argue for an extension of the tightening cycle.

PERU

The monetary policy meeting will be held on Thursday, May 12. The central bank is expected to raise its policy rate by 50 basis points to 5.0% and reaffirm plans for further rate hikes to normalize monetary conditions slowly.

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