Vanguard's Economic and Market Overview

Mexico ~2% Economic growth Tightening financial conditions and inflation have proved to be headwinds, as we expected at the start of the year. Thus our full-year 2022 growth forecast is little changed. High commodities prices benefit Mexico as both an energy and agriculture exporter, but they also spur inflation that can weigh on domestic spending and growth. ~5% Headline inflation Slowing global growth could eventually pull headline inflation down from its May levels of above 7%, though higher commodity prices remain a risk. Headline inflation has shown signs of moderating, but more persistent core inflation has risen for seven consecutive months, suggesting a broadening of price pressures throughout the economy. Change in basis points WHAT TO WATCH Central banks' inflation fights Realized and expected increases in real policy interest rates reveal Latin American central banks' efforts to rein in inflation. 1200 900 600 300 8% to 9% Monetary policy Four rate increases this year have taken the policy rate to 7.75%, and we believe that the Bank of Mexico will need to take it higher still to rein in inflation. While some emerging- market central banks may be poised to cut rates in 2023 as the global economy slows, we believe that Mexico may be 12 months away from joining them. ~3.5% Unemployment rate Unemployment has fallen to 3%, below already low pre-pandemic levels. We anticipate that it could rise by half a percentage point in the coming six months, which would put it at about the level it was several years before the pandemic. Notes: Figures related to economic growth, inflation, monetary policy, and unemployment rate are Vanguard forecasts for the end of 2022. Growth and inflation are comparisons with year-end 2021; monetary policy and unemployment rate are absolute levels. For institutional use only. Not for distribution to retail investors. 0 Brazil Colombia Mexico Chile Notes: The change in real interest rates is calculated over the period of June 2021 through June 2023. The one-year backward- looking change is calculated as the change in realized policy rates minus the change in the realized year-on-year inflation rate. The one-year expected change is calculated as the market-implied year-forward policy rate minus the consensus inflation forecast of economists surveyed by Bloomberg. A basis point is one-hundredth of a percentage point. Sources: Vanguard calculations, based on data from Bloomberg, as of June 27, 2022. V. | 24

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