Weekly Report 137
✅ The Fed reduced interest rates, but Powell’s remarks surprised markets with a more hawkish stance than expected. Although the decision was broadly anticipated, the surprise came during Chair Jerome Powell’s press conference, where he struck a firmer tone and cast doubt on the likelihood of another cut in December. Powell said that another rate reduction at the next meeting is not guaranteed, that policy is now closer to neutral, and that the Committee should proceed cautiously given the data blackout caused by the federal shutdown. In this context, we recognize that the stronger tone significantly reduces the probability of another rate cut in December, as assumed in our baseline scenario. However, for now, we maintain our projection until upcoming U.S. labor market data provide greater clarity on the next steps of monetary policy.
✅ In geopolitics, the week was marked by the extension of the trade truce between the United States and China and positive signs in dialogue between Washington and Brasília . Donald Trump and Xi Jinping announced a new agreement extending the truce and reducing tariffs, paving the way for an improvement in relations between the world’s two largest economies. At the same time, talks between Trump and President Lula were described as productive, marking the formal start of bilateral negotiations aimed at removing the 50% tariffs currently imposed on Brazilian goods. Both leaders expressed optimism about the outcome and agreed to conduct reciprocal state visits, signaling a diplomatic rapprochement between the two nations.
✅ Finally, the Brazilian labor market remained resilient in September. Formal job creation reached 213 thousand, well above expectations. More sensitive indicators, such as the voluntary quit rate, continued to rise year-over-year, suggesting that workers are still moving toward better opportunities, evidence of a tight labor market with solid reallocation dynamics. In the PNAD household survey, the unemployment rate remained stable at 5.6% in the quarter ending in September, while the seasonally adjusted series stood at 5.8%, still historically low. Overall, the results confirm the labor market’s resilience, which remains robust and shows only a gradual pace of cooling.
