🔆 BUYSIDEBRAZIL | WEEKLY REPORTWe revised our Fed Funds outlook and brought forward our rate hike call to September – 28/08
✅ On the international front, inflation in the United States returned to the spotlight. July’s PCE showed a slight reacceleration, with both the headline and core indexes rising above expectations. The underlying details were less favorable, with the surprise concentrated in underlying inflation and broadly spread across goods and services, while more volatile components, such as energy and food, helped contain the headline index. Against this backdrop, Kevin Warsh’s speech at Jackson Hole reinforced a firmer stance on inflation. Warsh reiterated the Fed’s commitment to the 2% target and highlighted that inflationary pressures remain broad, with the PCE diffusion index still above historical standards. With Warsh indicating that the Fed needs to see inflation converging clearly and sufficiently quickly toward the target, and given the prospect of limited improvement in the near term, we brought forward our expectation for a 25 bps rate hike from January 2027 to September 2026.
✅ In Brazil, this week’s data provided a more favorable reading of current inflation, while labor market indicators sent divergent signals between the PNAD and Caged. On inflation, in addition to the downside surprise in the headline index, the average of core inflation measures resumed its deceleration following the deterioration seen in July’s full-month IPCA. In the labor market, July’s PNAD continued to point to considerable resilience, while Caged provided a clearer sign of moderation in formal job creation. Taken together, the improvement in current inflation and the early signs of labor market moderation support our scenario of one additional 25 bps cut in the Selic rate
