Brazil’s inflation expectations, commodity exports

Brazil's central bank made it clear at its meeting this week that it will continue to hike rates aggressively until inflation expectations come down which, based on past form, will occur when actual inflation drops back. We expect that this will happen around Q2 next year. Otherwise, data this week showed a strong rise in Chinese commodities imports which bodes well for Latin American producers, but we doubt that the external backdrop will remain favourable over the coming quarters.