Brazilian inflation rose to a higher-than-expected 4.5% y/y last month, but this reflects higher food and energy inflation which the central bank has made clear it will look through. Underlying price pressures still look weak. Elsewhere, the rise in Chilean inflation to 2.7% y/y in July, coming against the backdrop of a strong economic recovery, supports our view that interest rates will ultimately be raised by more than the markets are pricing in.
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