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March 27, 2024

Inflation data for emerging markets

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Denys Liutyi
Karl-Philip Nilsson
Siwat Nakmai
Usama Karatella
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Brazil continues to cut rates

The Central Bank of Brazil's reduction of policy rates for the sixth consecutive time last week represents a calculated response to a stable inflation landscape.

The 50 basis points cut, aiming to achieve a three per cent inflation target within a +/- 1.5 percentage point range, forms part of a proactive strategy to insulate the economy against global economic shocks.

Factors such as commodity prices, domestic demand and exchange rate movements have been carefully balanced to maintain inflation within the target range, illustrating the central bank's commitment to fostering economic stability and growth.


China sees subdued inflationary pressures

China's subdued inflationary pressures, driven by deflation in sectors such as food, beverages, tobacco, transport and communications, reflect the complex interplay of domestic and international factors.

The country's economic slowdown, impacted by softer consumer demand, challenges in the real estate sector and slower retail sales growth, has contributed to this deflationary trend.

While inflation rose in February, the Lunar New Year, with its volatile food and travelling prices, may have only a {{nofollow}}temporary impact; factory activity remained subdued. The People's Bank of China faces monetary policy challenges, with limited room for easing due to the yuan's depreciation. However, the global shift toward lower interest rates may provide some scope for accommodative policies.


India’s food and beverages boost inflation

India's consumer inflation remains above the four per cent {{nofollow}}target yet within the two to six per cent range, highlighting the significant impact of supply-side constraints and changing consumption patterns. Inflationary pressures mostly stem from food and non-alcoholic beverages, with other categories generally having softened over time.

Seasonal variations, crop yield fluctuations and supply chain disruptions have a major impact on food prices. The Reserve Bank of India's cautious stance, maintaining the policy rate at 6.5 per cent, reflects concerns over these inflationary pressures and demonstrates the central bank's focus on supporting growth without compromising price stability. 


Mexico’s mixed picture

Mexico's inflationary landscape highlights the multifaceted nature of price movements within the economy. Spikes in sectors such as insurance (up by 19.3 per cent) and tour packages (8.9 per cent), juxtaposed with declines in audiovisuals (down 7.2 per cent) and household items (1.4 per cent), point to varying demand patterns, changes in consumer preferences and external cost pressures.

These dynamics reflect Mexico's ongoing economic adjustments to global economic conditions, exchange rate volatility and domestic policy shifts. 


Poland’s inflation on target, with utility bills in focus

Poland's achievement of its inflation target band, with a 1.5 per cent drop in goods prices and high inflation in services, speaks to the complex economic adjustments under way. Key factors include labor market conditions, wage growth and external price pressures, particularly in the energy sector.

The focus on utility bills – water supply and sewage costs have surged by almost 10 per cent and there is an upcoming {{nofollow}}unfreezing of electricity prices – highlights the impact of government policies and global energy market trends on domestic inflation. 


Thailand’s unusual deflationary trend

Thailand's deflationary environment, which contrasts with global inflationary trends, underscores unique domestic challenges. These include softening demand and the impact of global economic uncertainties on its export-driven economy.

The most recent -0.8 per cent headline and 0.4 per cent core inflation rates in February are well below the 1-3 per cent target range, while the largest category of food and non-alcoholic beverages has been {{nofollow}}shrinking since last year.

The Bank of Thailand's policy meeting, revealing a {{nofollow}}split decision on interest rates, highlights the central bank's cautious approach towards stimulating economic activity without exacerbating inflationary pressures. Factors such as tourism trends, consumer confidence and fiscal policies play critical roles in shaping Thailand's inflation.

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