Uncertainty is the key word in domestic and external scenarios – June 13 / 2025

The fiscal situation was the focus of the news this week, with emphasis on the new decree publication that deals with the increase in the IOF and the Provisional Measure with proposals for revenue compensation. There was a meeting of leaders on Sunday, but even so, the official announcements did not meet all interests. Now, there will be an urgent vote on the bill that overturns this new decree and the leadership of the Chamber signaled that the Provisional Measure should not move forward unless other spending cut measures are presented.

On the economic agenda, the indication was a slowdown in activity at the beginning of the second quarter, together with more modest inflation. Retail data brought a bearish surprise and the services sector was driven by transportation, while the other openings fell at the margin. In the same sense, the IPCA for May brought a new bearish surprise, which included not only the headline, but also the average of the cores. In this sense, we still foresee that the scenario of maintaining interest rates at the next COPOM remains the majority, given the continued high level of uncertainty in the global scenario, now accentuated by geopolitical tensions in the Middle East.

Finally, in the external scenario, there was a bearish surprise in US inflation, while risk premiums rose, reflecting tensions in the geopolitical scenario. The US CPI advanced less than expected in May, both in the headline and in the core. There was a loss of traction compared to the previous month due to the fall in fuel prices, but also in goods and services. In industrial goods, vehicles and clothing stood out, due to inventories formed before the increase in tariffs. Overall, the data show that the effects of the tariff shocks are still incipient. This week, representatives of China and the United States reached a provisional agreement, which benefited assets. However, Israel’s attack on Iran’s nuclear facilities increased risk aversion and had a major impact on oil prices. Thus, in addition to the previous commercial risks, geopolitical risk is now gaining prominence in market pricing.