The latest data out of Brazil point to a slowdown in GDP growth in Q2, which, alongside softening inflation, has led to a shift in the debate towards interest rate cuts, perhaps by year-end. This supports our view that, ultimately, interest rates in Brazil will come down further than most are currently anticipating. Elsewhere, GDP data from Chile out next week are likely to show that growth slowed last quarter. Even so, we think policymakers will place more weight on the recent rise in inflation and opt to pause the easing cycle in September.
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