The rise in Brazil’s headline inflation rate to 9.7% y/y last month was driven by a broad-based strengthening of price pressures. With the economy re-opening and electricity tariffs hiked this month, the headline rate will remain uncomfortably high well into next year. Our base case is that Copom will hike the Selic rate by 100bp (to 6.25%) when it meets this month, but the risk of a larger hike is growing.
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