The minutes to last week's Brazilian central bank meeting revealed that policymakers remain concerned about inflationary pressures, with inflation expectations now considered to be "unanchored". A possible change to the primary budget deficit target would only reinforce Copom's concerns and reinforce our view that the easing cycle will proceed more gradually than most currently anticipate. Elsewhere, in Chile, the proposed new constitution is more slim-lined and market friendly than the one that was rejected last year. But the latest polls still suggest that Chileans are likely to vote against the charter. This would mean that the current Pinochet-era constitution would remain in place which, in turn, would increase the risk of renewed public discontent and protests further ahead.
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