By Maia Mindel (email@example.com)
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Inflation in Latin America, rapidly accelerated in 2021 and 2022 after the deflationary slowdown in 2020, as a result of both increased demand after stimulative monetary and fiscal policies, and of supply factors ranging from international shipping delays to a commodity price shock given the events in Eastern Europe. The region's highest inflation rate is Argentina's 78.5%, which follows the country's singular price dynamics and economic policies. Meanwhile, the rest of the region is experiencing high inflation rates, led by Chile's 14.1% YoY, Paraguay's 10.5%, Colombia's 10.2%, Brazil's 8.8%, Mexico's 8.7%, and Peru's 8.4%. Ecuador, which has adopted the US dollar as its currency, is experiencing a lower inflation rate of 3.8%, and Bolivian price growth has barely budged - to 1.6% a year even in the most inflationary global environment in half a century. Following this spike in price growth, the region's Central Banks have embarked on an aggressive tightening cycle, as in the rest of the world.
In response to the newly inflationary global context, central banks have raised rates to their highest levels in years, and in some cases decades. This rapid tightening of financial conditions serves dual...