The jump in Brazilian inflation, to a seven-month high of 3.5% y/y in the middle of October, was driven almost entirely by the ongoing spike in food inflation. This is likely to keep inflation high in the next few months. But core inflation still looks very soft, which should allow the central bank to keep the Selic rate at its current historic low of 2.00% into 2022. Investors, in contrast, anticipate tightening next year.
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