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JPMorgan on Brazil Election & Selic Rate Forecasts

  • Most political analysts believe that demonstrations last week were not a game changer, highlighting that they are unlikely to have either given or taken a big enough chunk of votes to change the election outlook.
    • The next big event in schedule relates to the final 10-day sprint, when debates may take place. Two are scheduled for September 24th and 29th, but it is not clear whether the main candidates will be present.
  • While the recent negative inflation prints may provide some relief, JPM think that the options for Copom’s next meeting are open.
  • In fact, last week BCB’s Governor Campos Neto and Dep. Governor Serra made some hawkish comments, stating that the job on inflation was not done yet and that BCB should be vigilant.
    • While JPM recognize this is a very close call, for now they remain of the out-of-consensus view that the board will opt for a final 25bp hike to the Selic rate, raising it to 14% and keeping it at that level at least until the end of 2Q23.

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