Rio Times Markets · The Week Ahead
Week Overview
After last week’s rate-decision cluster, this week is about absorption — markets digest the Fed hold, the Copom move, the Bank of England’s vote split and the Bank of Japan’s hike to 1.00%. The single most important data point ahead is Thursday morning’s US Core PCE, the Federal Reserve’s preferred inflation gauge. Consensus has it at +0.3% month-over-month, which would hold the 12-month rate at 3.3%.
The same Thursday morning carries Brazil’s mid-month IPCA-15 reading, and Mexico’s Banxico decides in the afternoon. Banxico is expected to hold at 6.50%, but the post-meeting statement is where the read on Mexico’s regional positioning sits. Brazil’s IPCA-15 is the first inflation print since the Copom moved last Wednesday — prior was +0.62% month-over-month and +4.64% year-over-year.
The real-rate gap is the cleanest single explanation for Latin American positioning. With the Selic at 14.25% and 12-month IPCA running around 4.4%, Brazil’s real policy rate sits near 9.85% — about five times Mexico’s 2.05% (Banxico’s 6.50% minus 4.45% headline CPI) and more than twenty times the United States’ 0.45% (Fed funds at 3.75% minus 3.3% Core PCE). The arithmetic is why Brazilian assets keep attracting global flows despite ten consecutive weeks of upward revisions in inflation expectations.
