The International Monetary Fund (IMF) warned that inflation in the Latin American region could close this year with a double-digit rate and the highest level seen in more than two decades, according to a new complementary report to the World Economic Outlook.
For this year, the fund expects inflation in the region to reach a level of 12.1%, the highest record in the last 25 years. By 2023, they expect the rate to slow to 8.7 percent.
Inflation, on the other hand, has accelerated across the region, amid surging domestic demand, persistent supply chain disruptions, and rising commodity prices.
In his opinion, the central bank reaction Latin American markets has been adequate to contain the secondary effects of inflation, as well as to anchor long-term expectations; however, the high levels of inflation could be persistent after the accumulation of shocks and the amplification of pressures on prices.
Therefore, it would be expected that inflation will continue above the target rate of the central banks in the five large economies of the region, which are Mexico, Brazil, Chile, Colombia and Peru, this year and part of the following.
The IMF economists explained that the tightening of monetary policy, both in the region and in other parts of the world, as well as the current situation where the Covid-19 pandemic As the war in Ukraine continues, they are making financial conditions difficult for the region, which may come at a cost.
“Amid global monetary tightening and heightened economic uncertainty, external financial conditions for Latin America and the Caribbean are worsening, leading to rising borrowing costs and foreign exchange pressures,” the IMF said.
In this sense, on the fiscal policy side, the international organization pointed out that it is extremely important that governments should continue to focus on preserving macroeconomic stability and debt sustainability, without neglecting support for the most vulnerable sectors.
