Today, we are pleased to present a guest contribution by Steven Kamin (AEI), formerly Director of the Division of International Finance at the Federal Reserve Board. The views presented represent those of the authors, and not necessarily those of the institutions the authors are affiliated with.

In response to the surge in inflation that followed the pandemic recession of 2020, Latin America’s central banks responded much more aggressively than authorities in other regions, as may be seen in Figure 1 below.

Figure 1: Changes in Policy Interest Rates Since December 2020

The relative hawkishness of Latin American central banks was also evident conditional on the rise of inflation, as shown in Figure 2.  The horizontal axis shows how much core (excluding food and energy) inflation has increased in each country since December 2020, just before inflation started picking up worldwide. The vertical axis measures each country’s increase in policy interest

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.