✅ In the United States, President Donald Trump and Governor Lisa Cook are engaged in a legal dispute over suspected mortgage fraud. The institutional crisis surrounding the Federal Reserve escalated after FHFA Director Bill Pulte submitted successive requests for investigations against Governor Lisa Cook over alleged mortgage fraud. Trump stepped up the offensive by calling for her immediate removal from the Fed, at a time when pressure is already mounting on Jerome Powell to deliver faster rate cuts. On the Board, Trump already counts on Michelle Bowman, Christopher Waller, and Mark Miran as allies. Should the accusations against Lisa Cook proceed and the alleged mortgage fraud be confirmed, leading to her removal, the president would secure a fourth seat on the Board and, with a majority inside the Fed, could directly influence future monetary policy decisions.
✅ In Brazil, preliminary inflation surprised to the upside despite Itaipu bonus-driven deflation The August IPCA-15 posted a decline of 0.14% MoM, less intense than our projection and market expectations, taking the 12-month rate to 4.95%. Beyond the higher headline, the release pointed to weaker quality: the average of core measures accelerated 0.31% MoM, above forecasts, with broad-based pressures in underlying services (0.55%), particularly personal expenses. With the August preview, we expect 12-month IPCA to continue showing short-term volatility, with a more consistent convergence trend only from October onward. For the year, despite the more adverse qualitative reading, we maintain our projections of 4.7% for 2025 and 4.2% for 2026.
✅ Beyond inflation, the week was marked by the release of the Central Bank’s economic-financial statistics. On the external accounts, the current account deficit came in at USD 7.1 billion in July, wider than our projection and market consensus. The main driver was primary income, which posted a deficit of USD 8.9 billion, with profit and dividend remittances remaining elevated. On credit conditions, the key highlight was once again the increase in household delinquency rates in July, reaching 4.5 percent, with emphasis on the rise in unsecured household credit (6.5 percent). Finally, the consolidated public sector posted a significantly weaker result, with both primary and nominal deficits above consensus. The deterioration was mainly explained by higher nominal interest expenses, marked by the shift in FX swap operations of the Central Bank from a gain in June to a loss in July.
