WEEKLY REPORT Activity slows in Brazil, while inflation and fiscal developments add caution to the outlook – 25/09
✅ In Brazil, the Monetary Policy Report reinforced the view of a gradual slowdown in economic activity. In its assessment of the data already released, the Central Bank highlighted weaker momentum in industry and services in 2Q26, while agriculture provided a significant contribution to growth. The labor market remains strong, but the Central Bank also pointed to signs of moderation, with slower formal job creation and weaker hiring wage growth. For GDP, the Central Bank projects growth of 1.8% in 2026 and 1.4% in 2027, while we maintain our 1.6% forecast for 2027, with a downward bias.
✅ Inflation worsened at the margin, but the September IPCA-15 surprise remained concentrated mainly in volatile components. Headline inflation and the average of core measures came in above expectations, with food at home, gasoline, airfares, vehicle insurance, ride-hailing services and cigarettes standing out on the upside. Despite the less favorable composition, the surprises do not appear to reflect, for now, a broad-based deterioration in underlying inflation.
✅ On the fiscal side, the RARDP showed lower expenditure blocking, but a greater need for contingency measures to meet the fiscal target. The blocked amount fell from R$17.9 billion to R$2.4 billion, while contingency measures reached R$13.6 billion, bringing total restraint to R$16.1 billion. The change reflects the deterioration in the projected primary balance, which required additional restraint despite the lower need for expenditure blocking.
