The Brazilian central bank’s decision to up the pace of tightening to a 150bp rate hike (which took the Selic rate to 7.75%) was a clear response to concerns about a looser fiscal stance. With fiscal risks likely to persist, we now expect a 150bp hike in December (previous forecast 100bp) and that the cycle will end with the Selic rate at 10.50% early next year (previous forecast 9.00%).
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