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Latin America Led World Into High-Rate Era. Now It’s Stuck There

  • Central banks delivered giant hikes but inflation remains hot
  • Policy makers may turn to FX interventions to rein in prices
Customers shop for vegetables at the Central de Abastos Market in Mexico City, Mexico.

Customers shop for vegetables at the Central de Abastos Market in Mexico City, Mexico.

Photographer: Alejandro Cegarra/Bloomberg

In the fight against pandemic inflation, Latin America led the world into a new age of tight money. Eighteen months later, there’s not much sign that being first in will help the region to become first out. 

On Thursday, the central banks of Mexico and Peru announced what were respectively their 10th and 13th consecutive interest-rate increases. Forecasters don’t think either of them is done yet. In Brazil, one of the world’s first hikers back in March 2021, there’s some prospect of a halt. Still, policy makers said this week they expect to keep rates in “significantly contractionary territory for a sufficiently extended period.”