The week in Brazil should start focused on the cut in expenditures that the government should announce by Thursday; local news sources say that the government will have a meeting this Sunday to discuss a cut of up to BRL80bn, the largest in recent years. On the same day, the unemployment rate for April and the monthly GDP proxy for March (consensus: -0.50% m/m sa) are scheduled for release. This data set of tighter fiscal and weak activity should increase the likelihood of the BCB reducing the pace of tightening at the next meeting to 25bp.On Mexico, Banxico’s quarterly inflation report on Tuesday should bring revised growth forecasts, as economic activity seemed weaker than expected in Q1 15. Barclays notes:
- We expect more confidence from the board that the FX pass-through will not contaminate inflation dynamics, allowing additional time for neutrality.
- The growth dynamic of Q1 should be confirmed on Thursday, when the GDP data should be released; we forecast a 0.3% q/q sa expansion, from 0.7% in the previous quarter.
- Finally, on Friday, there is the bi-monthly inflation reading, for which we forecast a -0.50% print.
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