The US dollar saw a modest decline against the Brazilian real this Tuesday.
The slight drop reflects steady investor expectations regarding the Federal Reserve’s anticipated easing of monetary policy, even after US inflation data showed an increase.
The spot rate of the US dollar ended 0.08% lower at 4.9750 reais, while on the B3, the nearest future contract for the dollar fell by 0.14% to 4.979 reais.
The US consumer price index rose by 0.4% last month, marking a sequential increase from January’s 0.3% rise.
Year-over-year, consumer prices in February were up 3.2%, slightly higher than January’s 3.1%. This rate was in line with economists’ expectations for the month and year.
Nomad’s chief economist, Danilo Igliori, suggests February’s inflation stability may not strongly influence the Federal Open Market Committee (FOMC) to reduce interest rates.
However, it does not notably change the mid-year cut expectations either.
Despite the inflation data being slightly higher than anticipated, market indices remained positive, reinforcing the belief that the US is nearing the end of its inflation battle.
This latest inflation report did not significantly shift market predictions that the US central bank will hold its benchmark interest rate steady until a possible reduction in June.
The Federal Reserve’s forthcoming meeting is set for next week.
Meanwhile, Brazil reported a faster-than-expected rise in inflation for February, hitting a yearly peak, according to the IBGE.
The IPCA increased by 0.83% in February, exceeding January’s 0.42% and surpassing forecasts.
Despite the surprise increase, primarily driven by seasonal education cost fluctuations, there are signs of cooling in underlying service prices.
Market speculation hints at a potential 0.50 percentage point cut in Brazil’s Selic rate, possibly reducing it to 10.75%.