By Anthony Esposito

MEXICO CITY, (Reuters) – Central banks in Brazil and Chile could be required to give more monetary “medicine”, as rising inflation causes discontent among the regional central banks.

Brazil’s inflation rate has risen to the point that it is higher than expected, making it one of the most volatile in over 28 years. Chile did better than Peru with its largest jump in inflation since 1993. Mexico posted the 21st highest annual number and Peru, the highest for a quarter century.

Analysts believe this will cause central banks to raise rates more quickly than they planned. This is a result of the difficulty in bringing down inflation due to soaring commodity costs and global war in Ukraine.

Alfredo Coutino (NYSE: Analytics), director Latin America, Moody’s (NYSE) Analytics said that “inflation reality” requires more monetary medicine.

Following steep rises in prices earlier this year policymakers signaled that there would be slower increases. Chile raised its benchmark rate by 650 basis points in the second half of 2013. Brazil increased the rate to 11.75% from an unprecedented 2% mark in March.

This has not been able to control inflation, and the annual rise in fuel and grocery prices is driving up prices.

(Graphic: Latin America inflation – https://graphics.reuters.com/LATAM-INFLATION/zjvqkdlmnvx/chart.png)

TIGHTENING CYCLE

Capital Economics’ chief emerging market economist William Jackson stated that the higher than anticipated inflation rates support the belief that regional central bank will have to increase interest rates more than they expected.

He wrote that “it reinforces our belief that the tightening cycles will go further than what is implied by central bank guidance and analyst consensus.”

Brazilian interest rate futures rose after receiving the most recent inflation data. However, economists noted that Brazil’s expected increase in interest rates next month might not be as significant as it was previously thought.

Reuters has learned that Argentina’s central bank may raise its interest rate in April. After three consecutive hikes, this is Argentina’s highest annual inflation.

The person with direct knowledge said that there should be a new upward adjustment for the month. He also suggested that it would be restricted to 150 basis points so as not to stop economic growth.

(Graphic: Argentina: rates vs inflation – https://graphics.reuters.com/ARGENTINA-ECONOMY/zgpomndbrpd/chart.png)

“INFLATION IS BACK”

Policymakers from Latin America are facing a problem as a large global producer of commodities like corn.

The highest level of inflation in developed economies is now at 60%. In contrast, it’s over 7% for more than half the countries of the developing world.

It’s shaking governments all over the world, including Peru and Sri Lanka. These protests have been sparked by rising food and fuel costs. In response, the central bank raised the interest rate to its highest level since 2009.

(Graphic: Peru interest rate – https://graphics.reuters.com/PERU-ECONOMY/klvykjoabvg/chart.png)

In the second largest region, Mexican consumers saw a rise of 3% in March. This is compared to 2001. Experts expect more increases in interest rates.

The fight for lower prices is likely to be long.

Agustin Carstens, the head of Bank for International Settlements, warned this week that the world faces a new age of high inflation and higher interest rates due to deteriorating relations between China and the West.

According to the BIS central banking umbrella group, “Inflation has returned”.

(Graphic: Chile inflation: 30-year high – https://graphics.reuters.com/CHILE-INFLATION/byvrjbabove/chart.png)