LatAm monetary policy, upside risks likely to rise

The upside risks to additional monetary tightening (as in case of Brazil) or an early start to the tightening cycle (in case of Mexico) or declining downside risks of additional rate cuts (in case of Chile) are not necessarily due to the deterioration in inflation prospect in all cases.

"While this is true for Brazil, where the continued rise in upside risks to the medium-term inflation outlook has increased upside risks of additional monetary tightening (the Selic rate is currently expected to peak at 14.50% in Q3), in Mexico rates could rise earlier than the forecast at the moment (Q1 16) if the Banxico decides to follow the Fed's tightening cycle closely, although recent growth numbers moderate this risk to some extent" says Societe Generale. 

In Chile, the downside risk of additional monetary easing is effectively mitigated by pressure on the CLP and the growing believe that the low growth environment is to some extent structural (and not cyclical) in nature.