Latin America Economic Research

Research evidence excerpt

Latin America Economic Research

final 25bp cut at the a marked decline in the services sector (Figure 3). Partial

September meeting. This week’s July CPI preview (IPCA-15) coincident indicators also suggest a decline in July following

was notably soft. Core IPCA-15 has decelerated substantially the expected contraction in June.

across different metrics, running close to the target on its one-

Figure 3: Business and consumer confidence (FGV)

month seasonally adjusted rate, and slowing to 4.4% over the Construction

Diffusion index, deviation from historical average Serviceslast three months and to 4.9% over the last six months (Figure

5 Manufacturing

1). While inflation remains incompatible with the BCB’s 3% Consumer

target, this print was preceded by soft CPI releases, a trend Retail

that should continue at least through the September COPOM 0

meeting. This should reinforce the perception that near-term

inflation dynamics have improved relative to much of the first -5

half of the year, when expectations for policy easing were

curtailed.

-10

Figure 1: BCB core (IPCA-15) %oya 2025 2026 2027

Source: FGV and J.P. Morgan

%, gray lines show the target range %3m/3m, saar

6 %6m/6m saar The activity readings through July and inflation numbers

through August are the data the BCB should have in hand by

its September meeting. Barring a tightening in global finan-

4 cial conditions with material effects on the exchange rate, a

3 renewed escalation in the Middle East conflict with conse-

quences for global prices, or a sharp increase in medium-term

inflation expectations, we maintain our out-of-consensus

1 view that the BCB will extend its calibration to September,

Jan 24 Jul 24 Jan 25 Jul 25 Jan 26 Jul 26 Jan 27

Source: IBGE, BCB and J.P.