So far this year, several South American countries have begun reporting significant declines in their annual inflation rates. Peru, Chile, and Paraguay saw the sharpest price declines, a behavior that analysts attribute to the tight monetary policies of some central banks in the region.
After the impact of the pandemic and the consequences of the war in Ukraine on global markets, the economic authorities of several South American countries had to deal with problems in supply chains that triggered global inflation.
Since last year, under pressure from high prices, the region’s central banks have chosen to reverse the ultra-low interest rate strategy adopted during the pandemic and raise interest rates to stimulate consumption and achieve the desired inflation targets that each central bank has set for itself.
Brazil was among the frontrunners in raising reference interest rates, leaving behind Peru, Chile, and Paraguay, which also joined the wave. Decisions that even anticipated interest rate increases by the US Federal Reserve (FED) and the European Central Bank (ECB).
Exactly, Chile It is this country that is seeing a greater slowdown in its inflation rate when comparing the annualized records for January 2023 with those for July.
In the first month of the year, according to the statistics office, the annual rate was 12.3%, and in July it fell to 6.5% annually, a significant decrease of 5.8 percentage points, although still far from the set target range of the central bank between 2% and 4%.
Guyana It ranks second in this regional comparison: annualized inflation was more than 6% in January, and the rate was already below 2% in June.
Paraguay The country also has a similar outlook, and in just six months, the annual inflation rate fell by 3.6 percentage points compared to 7.8% at the beginning of the year. In the same period, Uruguay managed to reduce its annual rate by 3.26 percentage points and Peru by 2.76 percentage points.
Inflation is starting to fall in Latin America
Countries with the lowest inflation
Now, if the data is detailed not by the biggest variation so far this year but just by finding the lowest rate, we can talk about Ecuador and Bolivia.
Although there is no consistent downward trend according to the annualized data provided monthly, the latest rate data for Ecuador shows 2.1% per year and Bolivia 2.7%. Guyana also falls into this classification.
The central bank of Brazil, where inflation fell to 3.2% year-on-year in July, last month decided to cut interest rates for the first time in three years.
The countries with the largest increase in the cost of living in South America
This table is completed by the South American countries, which, unlike their competitors, have the highest inflation rates.
The first place is occupied Venezuela, which has just emerged from a hyperinflation phenomenon and whose inflation has not fallen below 350% this year, according to the Venezuelan Observatory of Finance (OVF). On the other hand, it was 439% higher year-on-year in July, making it the highest in the region.
Venezuela follows Argentina, which has been rumored to exceed triple-digit annual inflation since late 2022. It has exceeded 100 percent since February and has only shown signs of acceleration since then. The latest data is 115.6% per year (as of June).
