The new fiscal rule proposed by Brazil's Finance Ministry yesterday might have eased the central bank's fiscal concerns somewhat, but we doubt it will bring forward the timing of interest rate cuts. Indeed, the minutes to last week's central bank meeting poured cold water on hopes of an early rate cut and confirmed that policymakers' key priority is tackling inflation and high inflation expectations, which they now see as unanchored. Elsewhere, the ruling by Ecuador's constitutional court to allow impeachment procedures against market-friendly president Guillermo Lasso to go ahead has raised the risk of a shift to the left. That would significantly increase sovereign default risks, particularly when debt repayments pick up around the middle of this decade.
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