🔆 BUYSIDEBRAZIL | WEEKLY REPORT IPCA-15 surprises to the downside, presidential race remains uncertain, and the Fed is expected to hold rates in October – 10/23
✅ In the domestic inflation scenario, October’s IPCA-15 came in below expectations, but the favorable surprise was concentrated in volatile items. The index rose 0.32%, versus our forecast of 0.40% and the market median of 0.44%. The average of core inflation measures slowed from 0.34% to 0.31%, also below our forecast of 0.36%. Despite the improvement at the margin, the effects of airfares and personal care items do not point to broad-based disinflation.
✅ In the electoral arena, the race between Lula and Flávio Bolsonaro remains undecided in the final days, although the senator is still the favorite. The polling aggregator points to a stabilization in the gap between the candidates, following a loss of momentum in Lula’s recovery and Flávio’s halt in his declining trend. Although undecided voters, blank and null ballots, and turnout could alter the outcome, prediction markets still assign more than a 70% probability to a Flávio victory.
✅ In the international scenario, the Fed is expected to hold rates at 3.75%–4.00% in October, although we project a hike in December. Market-implied odds of an immediate hike fell from around 70% a month ago to 8.3%, while the probability of a hold rose to 91.7%. Persistent oil price pressures and geopolitical risks could lead to a resumption of monetary tightening toward year-end. In addition, concerns about AI investment weighed on technology stocks and helped push Treasury yields lower.
