With qualitative deterioration, current inflation reinforces caution in monetary policy – 10/25
Although the rise at the margin reflects the effects of the change in electricity tariff flags in October, the increase in underlying metrics was the highlight of the release.
The IPCA recorded a 4.47% increase over the past twelve months, a number very close to the tolerance range of the inflation target of 3%. As a result, views that the Central Bank should remain cautious in conducting monetary policy have strengthened, consolidating expectations of an acceleration in the pace of interest rate hikes at the next COPOM meeting in November. At the IMF, statements from Central Bank leaders highlighted the dynamism of economic activity in Brazil and concerns about fiscal risks. Along the same lines, Finance Minister Fernando Haddad reiterated the commitment to the fiscal target by stating that the framework does not need to be reformulated, but reinforced, which was well-received by market agents. A week before the US elections, Trump is advancing in the polls and moving global assets.
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