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Brazil’s services inflation, forecast changes

Even though Brazil's central bank gave a clear signal this week that it will cut interest rates in 50bp steps, there are still suggestions that easing core inflation might prompt the central bank to increase the scale of rate cuts. But a closer look at the data provides less reassurance that underlying price pressures have eased significantly and we expect core inflation to remain above the BCB’s target, which underpins our view that rates will come down a bit more slowly than most currently anticipate. Otherwise, this week, we published our latest Latin America Outlook in which we explained why we have a downbeat view on the growth outlook for Brazil and Mexico, but are more optimistic on prospects in parts of the Andes.

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