Brazil’s Inflation Gauge Hits 4.50%, Nudging Markets to Reprice Rate-Cut Timeline

Overview

• IBGE’s IPCA-15 rose 0.20% in November, taking 12-month inflation to 4.50%—the top of the 3% ±1.5 p.p. target band—slightly above the 0.18% median forecast as core services and diffusion edged higher.
• Short-tenor DI futures moved up after the print, partially unwinding Tuesday’s rally, with traders now split on whether the easing cycle begins in January or March while the Selic stands at 15%.
• Central Bank president Gabriel Galípolo reaffirmed the legal mandate to pursue 3.0% inflation via interest rates, as policy director Nilton David said the next Selic move should be a cut and that the question is timing.
• The real strengthened on Tuesday with the dollar closing near R$5.376 on softer U.S. data and growing odds of a December Fed cut, though local fiscal concerns limited outperformance versus regional peers.
• Markets remain attentive to strains between the government and congressional leaders, viewed as a potential fiscal risk that could shape moves in FX and the yield curve.