Weekly Report: Subdued inflation and a resilient labor market shape the domestic agenda – 11/28

✅ This week, Brazil’s economic indicators delivered a mixed picture, combining signs of a still-resilient labor market with a benign inflation reading . On the price front, November’s IPCA-15 rose 0.20% MoM, slightly above expectations at the headline level. Within the core measures, however, these upside surprises were offset by disinflationary drivers such as the sharp decline in voluntary vehicle insurance premiums and the moderation in industrial goods, influenced by November’s seasonal discounting. On the activity side, CAGED data disappointed, showing a net creation of 85 thousand formal jobs in October, below expectations and suggesting some loss of traction after September’s stronger result. While formal job creation was more moderate, the Continuous PNAD survey reinforced the resilience of the labor market.

✅ In monetary policy, speeches from Central Bank officials carried a firm tone, reinforcing the message of prudence, data dependence and full commitment to inflation convergence . President Gabriel Galípolo reiterated that there are no new elements warranting a change in the policy stance at this stage, stressing that the Central Bank does not react to short-term noise, external pressures or interpretations related to the electoral cycle. This more cautious tone was reflected in the yield curve, with short-term DI rates giving back part of the recent optimism as markets reassessed the likelihood of earlier easing. In our baseline scenario, we maintain the view that the easing cycle will begin in January 2026, when better-anchored expectations and a less volatile external backdrop should create conditions for a safer policy pivot.

✅ In the United States, this week’s data reinforced a picture of moderating activity and eased some inflation concerns, supporting higher market pricing for near-term cuts . The PPI came in line with expectations, with gains concentrated in food and energy and a still-benign core goods component. Retail sales showed a clearer slowdown, coming in below expectations and with a contraction in the control group. On the policy front, although Chair Powell has not spoken since the post-FOMC press conference, communication from other officials gained relevance. Williams, Waller and Daly adopted a more dovish tone, emphasizing labor-market deceleration and the fragility of post-shutdown statistics—factors that, according to the Financial Times, align with Powell’s own assessment. As a result, markets more consistently priced in the likelihood of a December cut, supported by both softer data and the adjustment in communication across FOMC members.