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Investing.com - Bank of America forecasts significant interest rate cuts across major Latin American economies through 2026, citing diminishing global inflation pressures in the region.
The financial institution points to three key factors supporting its outlook: expectations for a persistently weak U.S. dollar, decelerating economic growth in both the United States and China, and a baseline scenario that shows no upward pressure on oil prices.
Current policy rates remain substantially elevated in Brazil (15.00%), Colombia (9.25%), and Mexico (8.00%), translating to real interest rates of 11.00%, 5.50%, and 4.50% respectively when accounting for Bank of America’s year-end 2026 inflation forecasts.
Bank of America notes these rates exceed what central banks consider neutral levels, creating room for significant monetary easing as global conditions shift and output gaps in these economies are expected to close or turn negative in 2026.
The bank projects benchmark rates will fall to 11.25% in Brazil, 7.00% in Colombia, and 6.75% in Mexico by the end of 2026, with an additional deflationary factor being the influx of inexpensive Chinese goods into emerging markets amid ongoing U.S.-China trade tensions.
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