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JPMorgan Ahead Of Tomorrow’s IPCA Inflation Data

BRAZIL
  • BRL depreciation, combined with recent data showing a still resiliently tight labor market, reduces the downside risk to JPMorgan’s below-consensus call for inflation ahead, particularly for the beginning of 2024.
  • That said, the effects of recent events should take time to appear more clearly in the inflation numbers, which still face the lagged effects of the more disinflationary shocks seen for the better part of this year.
  • September CPI should still show a modest 0.24%m/m, nsa increase, with deflation in core goods CPI that is, in JPM’s view, having secondary effects through the economy, keeping core services at more moderate levels in the last couple of months. JPM thus remain comfortable with seeing inflation end this year below 5% and view the upward risks for inflation as concentrated in 1Q, if the current global dynamics persist.
  • As for activity, the recent events tend to hurt more than benefit economic growth over the next couple of years. While JPM haven’t changed their terminal SELIC rate at 10% next year, the tightening of financial conditions lately should keep the goods and construction sectors’ growth weak, compensating for the potential rise in disposable income that the recent fall in oil prices might produce.
  • Yet, as with inflation, for now JPMorgan just see risks for 2024 GDP forecast shifting, and keep their GDP estimate at 1.2% for next year.
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