Liliana Rojas-Suarez was quoted in an Emerging Markets article on inflation.
From the Article
Most South American central banks have tightened in earnest in recent weeks. While for now they might seem in control of the inflation fight, longer-term structural price pressures remain unresolved.
Inflation is back. The old scourge has returned to Latin America once more, as the region’s economies – having rebounded sharply from the global crisis – have begun to show signs of overheating amid surging capital inflows and rising global commodity prices.
Consumer prices are rising steadily in Brazil, Mexico, Colombia and Peru, while double-digit inflation is now entrenched in Venezuela and Argentina. Inflation is now tracking above central bank targets across most of the region’s major economies, even though it’s within the upper limit of central bank target ranges. And economists warn that countries could now start to see inflation – until now largely driven by food and energy prices – seep into the core.
“Inflation is a problem in 2011 and is likely to be more of a problem in the coming months than it is today,” says Guillermo Mondino, chief Latin American economist at Barclays Capital. “Countries have been rapidly closing their output gaps, and they’re now either fully closed or are very close to being so. This requires a concerted policy response from central banks.”
The surge in prices is down to a cost-push commodity price shock combined with demand-pull pressures, the result of excess liquidity from the post-crisis fiscal stimulus and commodity-fuelled inflows, says Alberto Ramos, chief Latin American economist at Goldman Sachs. Central banks have been wary to move on rates given uncertainties in the global economy. “Because the global recovery is still tentative, policymakers faced with the choice of being ahead, on or behind the curve may choose to be a bit cautious,” says Ramos.