Moody’s considered in a report that inflation will remain above the objectives of the central banks of the region, which will lead them to continue increasing rates “during most of 2022”.
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The credit rating agency Moody’s estimated that the high inflation in Latin America will lead the central banks of the region to additional interest rate hikes this year. However, he expects the price increase to slow down in the second half.
Moody’s considered in a report that inflation in the main Latin American economies will remain above the objectives of their central banks in the next 12 to 18 months, which will lead them to continue increasing rates “during most of 2022”.
Gersan Zurita, senior vice president of the firm, indicated that the factors that drive inflation vary by country, but the increase in food and electricity prices, together with the depreciation of currencies, have especially affected Brazil, Chile, Colombia, Mexico and Peru.
“Although we expect price increases to slow down in the second half of the year, inflation rates will not return to the low levels recorded during the peak of the pandemic” of covid-19, Zurita added.
Bank results would return to pre-pandemic levels
The agency pointed out that fiscal deficits in some countries improved last year as a result of higher inflation, but warned that higher interest rates on sovereign debt reduce fiscal space at a time of social tensions and political risks.
“The constant increase in prices in the economies of Latin America will continue to favor the sales of local companies, but their margins will fall” as lower household incomes and weak debt affordability “test demand”add note.
On the other hand, he predicts that the results of banks in the six main Latin American economies will probably return to pre-pandemic levels this year, although he expects “negative pressure” on profits in the next three to four quarters as a result of the adjustment of monetary policies. tougher.
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