Today’s Focus
The dominant engine for Brazilian assets this morning is the rapidly improving inflation arithmetic, which all but locks in a further 25-basis-point Selic reduction at the Copom’s decision next week. The mid-July IPCA-15 inflation print, released earlier this week, landed at a whisper-thin 0.06% month-on-month, dragging the twelve-month rate down to 4.52%—comfortably inside the central bank’s tolerance band and well below every estimate in the analyst consensus.
This dovish shock has reset expectations for the speed of monetary easing, directly revaluing every stock on the B3 that is tethered to the domestic credit cycle and consumer spending. With the Selic still towering at 14.5%, the sheer height of the real rate offers a powerful protective yield for the Brazilian real, giving foreign investors a reason to look through global turbulence, provided the local fiscal story holds firm.
That fiscal test arrives at 11:30 BRT today, with the release of the June primary budget surplus and the closely watched gross debt-to-GDP ratio. The market consensus has pencilled in a deep nominal deficit of R$133.2 billion, and any widening of the 81.5% debt ratio would be a trigger for an immediate risk-premium spike, sending the real weaker and momentarily overpowering the benign inflation narrative.
