BanRep to hike, Mexican growth, Brazil’s election race

The recent global bond market sell-off and rise in risk premia on Colombian assets is likely to shift BanRep's board in a more hawkish direction at next Wednesday's meeting. We now expect the central bank to deliver a final 50bp interest rate hike, to 12.50%. Elsewhere, Banxico took a downbeat view on the economy at yesterday's meeting, despite the stronger-than-expected activity data for July. Ultimately, though, as Banxico realises that the output gap is not quite as large as it estimates and inflation surprises to the upside, we think the odds are tilted towards an interest rate hike.