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Brazil – Elections 3/3: Far Beyond Voting Intentions – Brazilians are Conservative

Brazilians are predominantly conservative. Most people tend to uphold traditional values related to religion and family, as well as stereotypical views about gender roles, while showing limited acceptance of minorities (difference is tolerated, but often perceived as uncomfortable in the public sphere).   We know that a society’s behaviors and opinions are influenced by how secure people feel about their own survival: the greater the sense of fear, the more individuals tend to rely on discipline imposed by religion and traditional values[1].   Charts 1 and 2 show how Brazilian society has increasingly identified itself as more right-leaning and more conservative over the past decades.

Brazil – Fiscal and Credit Activism Working Against the Central Bank and in Favor of Excessive Indebtedness

What happens when fiscal stimulus and directed credit expansion are excessive? The answer: the monetary authority is forced to maintain excessively high interest rates to contain inflation, which worsens the financial situation of both households and firms.

US – Unit Labor Costs and Import Prices: All Roads Lead to Inflation

The monetary authority reduced interest rates last year in response to only a moderate increase in unemployment, but in an environment where the labor market remained tight. Labor supply may face additional constraints due to the aggressive immigration enforcement policy. The fact is that unit labor costs increased 2.4% over the 12 months through the last quarter of 2025, reflecting wages rising 5% and productivity growing 2.2% (Chart 1).

US – FOMC Meeting: Fed Holds Policy Rate. No Room for Cuts in 2026

The Chair of the Federal Open Market Committee emphasized that there will be no room for rate cuts until clear evidence emerges that inflation is converging toward the 2% target. We have previously highlighted that, even prior to the recent increase in oil prices, such a dynamic was unlikely to materialize in 2026.

Brazil – Elections 2/3: Beyond Voting Intentions – What Concerns Brazilian Voters

We outline below the key issues likely to dominate the 2026 electoral cycle and assess how each may shape electoral outcomes.   Charts 1 and 2 already provide a clear signal: crime and corruption have increased in salience over the past four years. Healthcare remains relevant, but less so than during the COVID-19 period, when it likely contributed to the defeat of the incumbent. Democracy, while not explicitly captured in Ipsos and Datafolha surveys, was a decisive issue in 2022 but is unlikely to carry the same weight in 2026. The economy does not appear to be a particularly sensitive topic at present, as inflation and unemployment are at relatively comfortable levels. ESG and diversity-related issues also show limited traction among voters.

US – PPI Reinforce That Inflation os Not Trading Lower

The inflation backdrop in the United States remains unfavorable. Core GDP deflator inflation had already shown an acceleration in January (from 3.0% to 3.1%). The latest PPI release now indicates that price pressures are not limited to wage-driven services but are also spreading to the goods segment, most likely reflecting the impact of tariffs (Chart 1).

Brazil – Elections1/3: Beyond Voting Intentions – Polarization and Pessimism

Current political polarization and pessimism may be linked to the discontent of a significant portion of the population that sees itself as a loser in a game arbitrated by institutions more concerned with self-preservation than with defending fair and impartial rules.   The hand of the state comes to be seen as determining the allocation of wealth in favor of specific groups — sometimes perceived as undeserving — without imposing a relevant burden on the most privileged segments of society. Hence the strength of themes such as meritocracy, religion, and entrepreneurship.   Polarization and pessimism in an electoral context favor populist approaches such as: the search for culprits, the presentation of simple solutions, attacks on institutions, and emotional appeals focused on fear.

Short Term Shock With Long Term Consequences

The outlook combines strong structural drivers (AI-led productivity and growth) with negative short-term shocks, especially higher oil prices. Globally, inflation remains persistent, limiting the scope for interest rate cuts, particularly in the U.S. Brazil, despite its strengths in commodities and energy, is constrained by inflation and high interest rates. The political environment is polarized and pessimistic, with rising risks of radicalization. An unsustainable growth model—based on fiscal expansion and credit—has increased debt, delinquency, and investor caution.

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