The decision by the Argentinian government to support the peso by raising required reserve ratios for banks highlights a point we’ve been making for a while – that the Milei administration is firmly focused on containing inflation ahead of the upcoming elections, even if this creates problems elsewhere. Meanwhile, GDP data from Brazil due out next Tuesday are likely to show that the economy slowed sharply in Q2. And while the economic hit from US tariffs on imports from Brazil will be fairly limited, other headwinds mean that the economy will grow at a slower pace over the rest of the year.
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