Weekly Report 140
We have revised our outlook and expect the Fed to keep rates unchanged in December amid elevated uncertainty – 11/21
✅ We expect the FOMC to leave interest rates unchanged in December, a decision that reflects the sharp increase in recent uncertainty, particularly after the loss of visibility caused by the shutdown. We believe that the absence or weakness of official indicators has significantly reduced the Fed’s ability to assess the pace of economic deceleration, the consistency of labor-market data and even the inflation trajectory ahead of the meeting, making it riskier to proceed with another cut without greater clarity. In our view, elevated statistical uncertainty, the need for more conclusive evidence on activity and inflation and the lack of deeper labor-market deterioration should prevail in the December decision. We therefore expect the Fed to keep rates on hold, resume cuts in January 2026 and end the year at 3 percent.
✅ In the geopolitical sphere, the removal of US tariffs on Brazilian products signals a meaningful bilateral rapprochement. The announcement made on Thursday by President Donald Trump revoked the additional 40 percent tariff on a relevant list of Brazilian goods, especially meat, coffee and tropical fruits, all of which are highly representative items in Brazil’s agricultural export basket. The move signals a shift in how the issue is being handled within the US government, creating room for the removal of tariffs to become not just a one-off gesture but potentially the first step in a broader process of commercial normalization. For Brazil, the measure reduces uncertainty around export flows, strengthens key agricultural sectors and demonstrates that the strategy of direct dialogue has produced concrete results.
✅ On the domestic political front, the nomination of Jorge Messias to the Supreme Court reinforces the government’s strategy of prioritizing profiles of trust and institutional alignment. Messias, a National Treasury prosecutor since 2007, has played a central role in Lula’s legal core, accumulating relevant victories on fiscal and institutional matters. Behind the scenes, Rodrigo Pacheco, president of the Senate, had been the preferred choice of an influential bloc within the chamber and had the backing of Davi Alcolumbre to secure his nomination. Lula’s decision in favor of Messias therefore not only frustrated this expectation but was perceived as a direct setback for the group that dominates the Senate and was prepared to play a leading role in the Supreme Court succession. From this point forward, the government will need to rebuild channels and manage the fallout to ensure that the confirmation process advances without escalating the tension left by the internal dispute surrounding the Court vacancy.
