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Santander Highlight IPCA-15 Notably Favorable In Qualitative Terms

BRAZIL
  • The IPCA-15 rose 0.21% MoM in October, in line with Santander’s forecast and the consensus, with the YoY change increasing to 5.05% (from 5.00% in September), which will likely mark its short-termpeak, in their view.
  • Broad qualitative measures came in way below expectations, indicating a consistent disinflation process. The EX3 core, which encompasses core services and core industrial goods, eased to 2.9% 3MMA- saar (from 3.3%), the lowest level since March 2021. Moreover, the diffusion index rebounded to 49.0% (sa), still low and compatible with inflation around the target in the medium term.
  • All in all, Santander believe the mid-month inflation print was notably favorable in qualitative terms. The upside surprise in the breakdown came mostly in volatile items, which erased all the downward surprise of the core gauges in the headline. In their view, the diffusion rate and deceleration in core services indicate the continuation of a benign inflation trend ahead.

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