Monetary policy in Latin America shifts to forward-looking approach for inflation.
The article explores how monetary policy in Latin American countries responds to inflation under different levels of trust in the central bank. By analyzing data from the four largest economies in the region, the researchers found that when the central bank is highly trusted, monetary policy focuses solely on expected inflation. However, when trust is lower, the policy also considers past inflation rates. As trust in the central bank improves, the priority shifts towards stabilizing expected inflation over actual inflation.