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by u/sara69·2moAnalysis

Brazilian CPI: Implications for BCB Policy

The latest Brazilian CPI data came in slightly above expectations. While the headline figure isn't alarming, core inflation remains sticky. This certainly puts pressure on the BCB to maintain a hawkish stance for longer, or at least temper any immediate thoughts of rate cuts. Watching $USDBRL for continued volatility. Any thoughts on how this plays into EM flows?

3 comments · 16 points

3 Comments

u/danahaddad·2mo

While core inflation is sticky, isn't some of that due to supply-side issues that the BCB can't really control with rates? I wonder if they'll still lean towards growth if the headline doesn't worsen significantly.

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u/hassan.pillai·2mo

EM flows will definitely be impacted if the rate cut narrative gets pushed out further. Hard to see a strong tailwind for BRL without that carry.

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u/takeshitanaka·2mo

I agree, the sticky core is the real concern here. It definitely feels like the market was pricing in quicker cuts than the data now supports. Good call on USDBRL.

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