The rise in Brazil’s headline inflation rate, to 4.8% y/y, in the first half of November was partly driven by a further increase in underlying core services inflation and means that Copom is likely to raise the Selic rate further than we previously thought. We now expect it to peak at 13.00% in the first half of 2025 (previously 12.00%). But a lot rests on the details of the government’s proposed spending cuts. Failure to soothe investors’ fears about the state of the public finances could prompt even more aggressive hikes.
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