The slowdown that we expect in Brazil’s economy should take some steam out of the labour market, but it looks like it won’t be enough to stop wages from rising at a rapid pace. This appears to be a bigger risk to the inflation outlook than the fiscal concerns that are dominating the narrative at the moment. We now think inflation will remain higher than most are forecasting this year, and we have pushed back the timing of the first interest rate cuts in our profile to Q4.
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