The International Monetary Fund has published a Departmental Paper on the anchoring of long-run inflation expectations in Latin America during the post-COVID inflation shock. The paper finds that monetary frameworks, many put in place around the turn of the century, generally held up well, with long-run inflation beliefs moving little despite large shocks. Using new data on anchoring, the study finds that both tails of the expectations distribution have moved closer to central bank targets over the past 20 years, although an upside skew remains. Stronger anchoring reduced the inflationary impact of external shocks, while the effects on monetary transmission were mixed but aligned with theory. The paper also finds that credibility changes asymmetrically, with hawkish monetary policy surprises producing only modest gains in anchoring, while dovish shocks weaken anchoring more quickly. Narrative case studies indicate that moves toward inflation targeting can anchor expectations even during crises when institutional and political support remains strong.
International Monetary Fund2026-05-26
International Monetary Fund paper finds Latin American inflation expectations stayed broadly anchored through the post-COVID surge
The International Monetary Fund has published a Departmental Paper assessing long-run inflation expectations in Latin America during the post-COVID inflation shock, finding that modern monetary frameworks generally kept long-run beliefs stable despite large shocks. The study reports that expectations have moved closer to central bank targets over the past two decades, that stronger anchoring dampened the inflationary impact of external shocks, and that credibility responds asymmetrically, with dovish surprises eroding anchoring more than hawkish surprises.