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Commerzbank: BCB Remains An Important Support For The Real

BRAZIL
  • BCB President Roberto Campos Neto had warned the markets in a hawkish statement last week that the central bank might well hike its key rate once more at its meeting Wednesday next week.
    • As a result, the real was able to appreciate after the inflation data for August last Friday illustrated that inflation in Brazil had fallen less than expected despite tax cuts and measures to reduce fuel prices. The price categories not affected by the measures continued to rise unabated.
  • That means the likelihood of the BCB’s rate hike cycle being extended has risen. This is likely to strengthen the resilience of the real ahead of the politically turbulent weeks.
    • Concerns about unrest at the occasion of the National holiday last week were not confirmed but the incumbent Jair Bolsonaro continues to trail in the polls. That means the gloves will be off in the latter stages of the election campaign, threatening to affect the Real time and again.

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