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Goldman Sachs See Limited Room For Acceleration Of BCB Easing Pace

BRAZIL
  • Goldman Sachs noted the August headline print benefited from a further drop in food at home prices, declining airfares, and moderation in the monthly print of food away from home. The acceleration of inflation in Aug from July was driven chiefly by higher electricity tariffs and industrial goods, alongside higher monthly prints in the household goods, education, and in particular personal care expenses.
  • Core inflation printed at 0.34% with the annual measure easing further to 5.30% Y/y, from 9.12% at end-2022. Core services inflation printed at a lower than expected 0.27% in August but is still running at a relatively high 5.40% Y/y.
  • In Goldman Sachs' assessment, a stronger BRL, lower food prices, wholesale price deflation, and moderate realized inflation should support the continuation of a gradual easing cycle.
  • GS say a tight labor market backdrop, resilient real activity, expansionary fiscal and quasi-fiscal policy backdrop, and still unanchored short- and-medium-term inflation expectations limit the room for a near-term acceleration of the pace of rate cuts.

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