NEW YORK, (Reuters) – Inflation reached its highest point in fifteen years last year in Latin America’s biggest economies, however, credible monetary policies kept inflation expectations low for the long term, according to the International Monetary Fund in a Monday blog post.

The IMF reported that prices rose 8.3% in 2021 in Brazil, Chile and Colombia as well as Mexico, Peru, and Colombia. This is the highest increase in price since 15 years, and also higher than other emerging markets.

Argentina was another important economy of the region and saw its inflation rate rise to over 50% in 2013.

According to the IMF there are other factors that have contributed to rising commodity and import prices. However, in some instances, prices have been pushed higher by forex weakness and increased consumer demand.

Central banks in Brazil, Chile Chile Colombia Mexico Peru have gained credibility by raising policy rates last year from 1.25 to 7.25 percentage points. The Fund stated that policy tightening and forward guidance have contributed to stabilizing inflation expectations.

Long-term inflation expectations are still relatively stable, reflecting trust in the monetary policy’s ability to return inflation to target. The IMF stated that short-term inflation expectations were elevated and suggested the need to continue vigilance.

Another variable that the region must consider is tighter US monetary policies, which tend to increase pressure on Latam as well as other emerging markets.

According to the IMF, policymakers should prepare for U.S. tightening in monetary policy by raising public debt maturities and decreasing fiscal rollover need more generally. They also have to limit currency mismatches on financial sectors balance sheets, where appropriate.

SOCIAL TENSIONS LINGGER

The high risk of social unrest in the region is being exacerbated by price pressures and an active electoral year.

After a year of unrest and social stagnation, the pandemic struck. This was a result of years of poverty in the region following the demise of the commodity boom. “Social unrest and inequalities remain a serious risk with a busy election season,” said the IMF.

Brazil, Colombia, Costa Rica and Mexico will be electing presidents in this year’s elections. Referendums and local election are also expected to take place in Chile Uruguay Mexico Peru.

GROWTH SLOWDOWN

After an anticipated 6.8% increase in 2021, the IMF reduced its 2022 forecast for GDP growth in Latin America/the Caribbean by 0.6% to 2.4%.

According to the Fund, slower growth in China was noted by the United States as well logistics bottlenecks. The Fund also highlighted the Omicron variant’s emergence in the region downgrade.

These three challenges have left the Fund with the following: the sustainable development of public finances, the potential for growth and the promotion and treatment of social inequality.

It will take some time to address these problems, which began long before the pandemic. According to the Fund, policymakers must begin developing a complete strategy that addresses them all and building consensus among society.