Latin America Data Watch: The hard part of disinflation

Research evidence excerpt

J P M O R G A N

Latin America Economic Research

14 August 2026

Latin America Data Watch

The hard part of disinflation

Inflation in most of Latin America continues to move closer to central-bank targets,

but recent releases suggest that proximity alone is not enough to alter the policy

debate. In several economies, headline inflation is already approaching levels that

would historically have been viewed as broadly consistent with policy

normalization. Yet central banks continue to emphasize caution, reflecting

uncertainty about the sustainability of recent gains and the persistence of

underlying inflation pressures. While some economies have made considerably

more progress than others and policy rates in a few cases are already much closer

to neutral levels, policymakers across the region continue to emphasize caution,

reflecting uncertainty about the sustainability of recent gains and the persistence

of underlying inflation pressures.

EM, Economic and Policy Research

This apparent disconnect between inflation outcomes and policy stances reflects

an important feature of the current cycle. The final phase of inflation convergence

is often more difficult than the initial decline. Favorable food dynamics, lower

tradable-goods inflation, and supportive base effects can bring headline inflation

lower relatively quickly. Ensuring that inflation remains sustainably close to target

is a different challenge altogether. That objective increasingly depends on

domestic demand conditions, labor markets, inflation expectations, and the degree

of inertia embedded in the pricing process.

Katherine Marney

Brazil’s recent inflation dynamics, though improving in the last few months,

remain among the most challenging. The July IPCA surprised to the upside across

virtually all major underlying components, but this comes after a major downside

surprise with the mid-month CPI preview, and at a moment that inflation

momentum is moderating relative to earlier this year. With growth readings also

moderating, this should be enough to provide arguments for a final 25bp cut at the

September COPOM meeting. However, the country’s tight labor market should be

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