Inflation Threat Still Looms, Led By Domestic Demand

Latin America emerged relatively unscathed, both economically and politically, from the period of surging commodity prices in early 2011. With prices set to moderate in the second half of the year, we consider the potential impact of rapid, domestic-driven inflation over the next 12 months. Countries with rapid credit growth, expansionary fiscal policy and tight labour markets appear most at risk, although ongoing monetary and fiscal tightening should prevent a serious threat to macroeconomic stability.

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