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Core inflation will drive the rate cutting cycle in Brazil
Weekly investor research
24 October 2016
The rate cutting cycle has begun in Brazil and the behaviour of core inflation, not politics, will determine the future pace of
cuts. Venezuela‘s government raised the stakes in its battle to survive a recall referendum by cancelling the collection of
signatures on judicial grounds. In the Philippines, President Duterte’s tilt towards China looks more sensible given broader
global trends. Saudi Arabia’s big bond bonanza created a new set of benchmark bonds for Middle East sovereigns and
corporate issuers alike. The breakdown of Chinese Q3 GDP suggests that the shift from export to consumption-led growth is
progressing well. Colombia’s tax reform is submitted to Congress despite the recent FARC referendum defeat. South African
growth may be lower than expected in Q3 after a slew of weak high frequency data. Malaysia’s prudent budget increases
odds of further easing from the central bank. Chile votes for more market-friendly leaders in local elections. Nigeria seems to
be realising that FX policy is not quite right. Meanwhile, in the rich countries ECB suggested yet more easing, while the talk
of yield curve control in the US makes perfect sense given the economic reality.