In the coming week, international ratings agency, Fitch Solutions will be watching inflation prints from several key Latin American markets, namely Mexico, Chile, Brazil and Argentina.

In Mexico, it is expected that headline inflation growth will continue cooling from 6.9 per cent year-over-year or 0.3 per cent month-over-mont in March on the back of favourable base effects. Fitch still expects Banco de México to hike again by 25 basis points (bps) to a terminal rate of 11.50 per cent in May but risks to this forecast are skewed to the downside.

In terms of the longer-term trajectory for inflation, Fitch anticipates that it will land at 5.1 per cent by the end of 2023, paving the way for 50 bps of easing by December.

In Brazil, inflation came in at 4.7 per cent year-over-year or 0.7 per cent month-over-month in March, a notable slowdown that was mostly due to base effects.

However, an acceleration in prices in the second half of 2023 is expected as base effects turn. Headline inflation in Brazil is expected to end the year at 5.8 per cent, though Fitch still expects the Banco Central do Brasil will lower the Selic rate from 13.75 per cent currently to 12.75 per cent by the end of 2023.

Argentina up against the wall

The outlook for Argentina is much gloomier. Fitch anticipates that in Argentina, prices will continue climbing from 104.3 per cent year-over-year (7.7 per cent month-over-month) in March, as the inflation spiral continues. Argentina nosedived into an economic crisis in 2018 after the peso lost half its value and it has never fully recovered.

Annual inflation has remained above 50 per cent for majority of the time since then and reached 103 per cent in February. Additionally, the country, which is a major global grains exporter, is grappling with one of its worst droughts in history knocking billions off the economy from lost exports, thereby fueling domestic prices.

Given these factors, there is no expectation that Argentine CPI growth will see significant easing this year. Given this, Fitch plans to make an upward revision to its current inflation average forecast of 102.8 per cent in the coming days.