Data-Dependent Fed and Dead Heat in Brazil

Key arguments

• Fed Governor Waller signals a data-dependent stance, with his September vote hinging on next week's inflation data, and soft data could lead to holding rates steady.
• Market pricing for a September Fed hike fell from about 65% to 52% following Waller's comments, highlighting increased uncertainty.
• Expectation that August payrolls will undershoot consensus and unemployment rate will tick up, indicating continued labor market softness without inflationary pressure.
• In US rates, Natixis is neutral directionally but more confident in steepeners, particularly 2s10s, after recent flattening; the curve held ~30bps which is a good level to lean against.
• Brazil's presidential election is statistically tied with a spread of 1.6ppts in favor of Lula as of September 3, within the margin of error.
• Chile's central bank is likely to keep policy rate at 4.50% for longer due to low growth, weak CLP, and stubborn inflation.
• Peru's central bank is expected to keep the policy rate at 4.25% in the coming months despite potential inflationary pressures, due to strong PEN and uncertainty about El Niño impact.

Corresponding source evidence

1. The ongoing war, rising oil and, for Europe, gas prices, concerns about AI issuance, government deficit worries ... all contributed to the rise in yields. · medium-term
2. We believe the BCCh will keep the policy rate at 4.50% not only at next week’s meeting, but also over the next nine months. · next nine months