Inflation, monetary policy, and purchasing power in Latin American economies.

Abstract

Recent inflation in Latin America showed a sustained reduction, although its effects on consumption, real income, and household welfare remained heterogeneous. The study aimed to analyze the relationship between inflation, monetary policy, and purchasing power in Ecuador, Brazil, Chile, Colombia, Mexico, and Peru, as well as to contrast the dollarized Ecuadorian economy with inflation target regimes. A qualitative, documentary, non-experimental, retrospective, and exploratory methodology was applied, based on official and academic sources corresponding to the period 2019–2024. The results showed that the average inflation of target economies was 4.14% at the end of 2024, accompanied by an average policy rate of 8.35%, while Ecuador recorded an inflation rate of 0.53%, a consumption contraction of 1.3%, and a GDP decrease of 2.0%. The evidence indicated that disinflation did not produce a homogeneous recovery of purchasing power, as it coexisted with weak spending, poverty, and territorial inequality. Consequently, price stability proved necessary but insufficient to ensure general improvements in well-being, so its evaluation required integrating monetary, distributive, and consumption indicators.