The small rise in Brazilian inflation (to 3.4%y/y in August) is unlikely to trouble policymakers at the central bank. With the headline rate below target and the economy struggling, we expect a 50bp cut in the Selic rate (to 5.50%) later this month. Similarly, the rise in Chilean inflation (to 2.3% y/y) won’t prevent the MPC from cutting interest rates further – we expect 75bp of cuts by early 2020.
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