Weekly Report 139
Copom minutes signal stronger conviction that monetary policy is working while economic data support the assessment – 14/11
✅ Following the decision to keep interest rates unchanged, the Copom minutes delivered a more dovish communication. On inflation, the Committee highlighted the more benign recent trajectory and expectations that have become better anchored beyond the relevant horizon. It also signaled that it chose to incorporate, even if only preliminarily, the potential impact of the expansion of the income tax exemption bracket into the inflation model. This decision reinforces transparency and caution, but it is noteworthy that even after adding a shock that would normally push projections higher, the model still pointed to lower inflation in the relevant horizon. This indicates that the improvement in expectations and current dynamics was strong enough to more than offset the upward effect of the tax measure, reinforcing the perception of a more favorable inflation environment.
✅ On the data side, this week’s releases corroborate the Central Bank’s communication. The October IPCA, which rose 0.09 percent MoM, showed a more favorable composition, with core measures running at a moderate pace and a more benign behavior in both industrial goods and underlying services. Activity data also confirmed weaker momentum: the retail survey (PMC) posted widespread declines in the restricted index, pointing to broader softening in retail trade, while the services survey (PMS), although stronger than market expectations, already shows signs of moderation in services provided to households. In both surveys, the quarterly comparison confirms a slowdown relative to the stronger performance seen in the second quarter.
✅ In the United States, the end of the shutdown after 43 days removes an important source of institutional dysfunction, but uncertainty surrounding the reading of the economy remains elevated . The agreement approved by Donald Trump and Congress is temporary, securing funding only through 30 January and leaving out sensitive issues such as the renewal of Obamacare subsidies, which heightens the risk of another shutdown early in 2026. Moreover, the prolonged interruption created significant gaps in statistical production and normalization is unlikely to be immediate. According to National Economic Council Director Kevin Hassett, upcoming indicators may be incomplete or delayed and, so far, the BLS has not published a revised release calendar, increasing uncertainty regarding the timing and reliability of upcoming data.
