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(Bloomberg) -- Just as the Federal Reserve seems ready to clear the way for Latin American central banks to keep cutting interest rates, growing political problems at home are set to disrupt — if not reverse — those easing campaigns.

Presidents across the region are lashing out against policymakers for high borrowing costs that are hindering the vigorous economic growth they promised, and in some cases are directly fanning inflation. As central bankers from Brazil, Colombia and Chile all convene on Wednesday to set rates, investors are betting there’s less space for easing than before.

On top of price threats including public spending and extreme weather, policymakers in many nations must now navigate turbulence from political decisions. Presidents in Brazil, Colombia and Mexico will further stamp their influence by naming new central bank board members in the coming months just as tensions flare. Even Peru’s Julio Velarde, the region’s longest-serving bank governor, has faced scrutiny for not lowering rates faster.

“We see fiscal risks around the debt path of the region, and political risks on top of that,” said Ernesto Revilla, chief economist for Latin America at Citigroup. “The region graduated to a different level with this monetary policy cycle and was able to move ahead of the Federal Reserve. But we are at the limit of how low rates can go to tame price pressures.”

Hours after the Fed is likely to signal easing on Wednesday, Brazil is expected to keep rates steady for the second month amid government hostilities, and Chile’s policymakers could also hold after lawmakers unfroze energy tariffs.

Colombia is likely to deliver a half-point drop as the central bank’s majority fends off demands for faster reductions from the president and his finance chief.

Despite restrictive rates in place region-wide, only Brazil and Peru have hauled inflation back to their tolerance ranges. Banks won’t see consumer price increases back at target until 2026 at the earliest, according to Bloomberg surveys of economists. Governors across the region say services costs remain resilient, and weaker currencies are also creating risks.

Economists have responded by raising their 2024 year-end interest rate forecasts for Brazil, Mexico, Colombia, Chile and Peru. That, in turn, is causing increasing discomfort among regional leaders.

‘We’re Condemned’

Perhaps nowhere have tensions risen as quickly as in Brazil. A split policy vote in May, when all directors appointed by President Luiz Inacio Lula da Silva formed the minority backing a bigger rate cut, hit local assets. Investors still mull whether the central bank will become more lenient toward inflation after the leftist head of state taps a new governor and two board members this year.

For now, Brazil’s likely rate hold is providing some respite to investors. Still, that stance has set off new attacks from Lula, who has panned current Governor Roberto Campos Neto as a “political adversary” and shown no signs of letting up on complaints that high borrowing costs are sabotaging economic growth.

The political animosity, coupled with fears over public spending hikes, helped sink Brazil’s real to a year-to-date low earlier this month. It is also helping drive trader bets of borrowing cost increases this year.

“We are condemned to this politicization of monetary policy until the end of Lula’s term,” said Thomas Traumann, a Rio de Janeiro-based communications consultant.

Analysts at Goldman Sachs Group Inc. say Brazil is a cautionary tale for the region. Similarly to Lula, Colombia President Gustavo Petro has often attacked the central bank for high interest rates, demanding that policymakers consider economic growth.

Petro has to change two members of the bank’s policy committee by February at the latest, meaning he’ll have appointed four of the seven people who set borrowing costs. His Finance Minister Ricardo Bonilla, who also holds a seat on the board and backs faster cuts, is again seen clashing with the more hawkish majority at Wednesday’s rate decision.

And some economists warn that Mexico is next in line. The mandate of Irene Espinosa, arguably one of the most hawkish board members of the central bank, will end in December, opening up a vacancy at an institution that has so far cut rates only once this year. Incoming President Claudia Sheinbaum will then get to tap another member in 2026 and a new governor in 2027.

“The president won’t try to interfere too much in the very short-term,” said Federico Rubli, a former Mexican central bank adviser. “But the government could get desperate if it doesn’t see signs of a vigorous economy, favoring less orthodox economists and tapping people close to the president for the central bank.”

Global Factors

On Wednesday, regional policymakers will still be watching closely for concrete signs on when the Fed will start its own easing cycle, which in turn would help alleviate pressure on Latin American currencies.

“Global factors are the drivers of the cautiousness we see in Latin America’s central bankers,” said Armando Armenta, a senior economist focused on emerging markets at AllianceBernstein LP.

Going forward, regional leaders are all too aware of problems that weak economies could pose for their administrations. The World Bank sees Latin America’s GDP expanding just 1.8% this year.

“Lula is very concerned with his approval levels, more than during his prior terms in office after how tight the election was,” said Traumann, in Brazil. Lula knows he can only criticize the central bank up to a certain point without hurting the currency and ultimately fanning inflation, Traumann added.

As central bankers face new challenges in their fights against consumer price increases, there’s greater scrutiny over how much activity governments have to forfeit during the pursuit of inflation rates near 3%.

“Our central banks never achieved those levels of inflation, so it’s reasonable to question how much growth we are still willing to sacrifice,” said Revilla, from Citigroup. “The problem is that the debate is very likely to be politicized.”

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