Brazil’s central bank expressed confidence in its capacity for keeping inflation close to the official target until the end of 2027, as it published medium-term projections on Thursday in which the price growth continues to slow.

In its quarterly monetary policy report, the bank lowered inflation estimates for 2025 and 2026 and added a 3.2% expectation for the final quarter of 2027, putting the figure closer to the 3% target set by policymakers.

This view comes after an extended and heavy monetary tightening campaign that has taken the country’s key Selic interest rate to a 15% near-20-year high.

The current hiking cycle was initiated by the central bank in September, and in aggregate, rates have been hiking 450 basis points to balance the trade-off of controlling inflation with growing the economy.

Although inflation was predicted to be 3.6% in 2026 earlier this month, the newly announced 2027 projection of 3.2% shows that the trend will continue downward.

The bank’s target range for inflation is 1.5% to 4.5%, offering policymakers some breathing room in the face of global uncertainty and local structural concerns.

Tighter policy, stronger growth

Despite the high interest rate environment, Brazil’s economy has demonstrated resilience. The central bank raised its 2025 GDP growth prediction to 2.1%, from 1.9% in March.

The improvement reflects stronger-than-expected labor market performance in the first half of the second quarter, as well as a slight boost in consumer activity due to regulatory changes affecting payroll-deductible loans in the private sector.

These policy changes have bolstered household liquidity and boosted consumption, even though borrowing costs remain high.

Still, officials remain cautious, predicting a decline in growth in the second quarter and into the second half of the year.

The analysis identifies many factors that could dampen momentum, including tight monetary policy, limited spare in production capacity, declining global demand, and a waning boost from the agriculture sector, which contributed considerably to first-quarter growth.

Inflation forecasts revised downward

With its new 2027 marker, the central bank cut its inflation forecast for the preceding years. That cut 0.2 percentage points from the 2025 forecast to 4.9% and slightly lowered the 2026 outlook to 3.5%, a decrease of 0.1 point. The shifting trends imply inflationary pressures are gradually lifting, but it is an ambiguous picture at best.

The report indicates a mixed bag of forces impacting prices. The upside, however, is that better-than-expected economic activity continues to drive the services sector pressure.

The flipside is that the brl appreciation and the fall in the international prices of oil recently also helped to alleviate a little bit of those cost pressures, leaving more space to the central bank to breathe without the need for a further immediate tightening margin.

The bank also highlighted its ongoing hawkishness, calling the current level of interest rates “consistent with a very long pause.” It reflects a prudent strategy aimed at firmly reanchoring inflation expectations around the 3% target prior to any easing cycle by policymakers.

Path ahead: gradual disinflation under global uncertainty

The central bank’s most recent report paints a picture of cautious optimism. While inflation remains over goal in the short term, predictions indicate a gradual convergence over the next two years, even as global GDP is likely to decrease.

Domestic resilience, increased policy transmission, and favorable external variables, such as commodity price reduction, all contribute to the disinflationary path.

However, the road ahead is not without risks. Uncertainty over global interest rates, particularly in the United States and Europe, could spread to emerging countries, complicating Brazil’s monetary policy. Domestic economic pressures and political dynamics may also influence medium-term forecasts.

For the time being, the central bank appears to be holding firm, wagering that patience and policy persistence would return inflation to the desired corridor.

The next several quarters will put that confidence to the test, as Latin America’s largest economy struggles to strike a balance between growth and price stability.

The post Brazil Central Bank sees inflation near target by 2027, trims 2025–26 forecasts appeared first on Invezz

Disagreements on import duties for auto components, steel, and farm goods have stalled trade talks between India and the US.

The disagreements jeopardise hopes for a deal before US President Donald Trump’s July 9 deadline for reciprocal tariffs, according to a Reuters report on Thursday. 

This stalemate represents a significant departure from the previous optimism, which stemmed from Trump’s assertion that New Delhi had offered a “no tariffs” deal for American products, and suggestions from officials on both sides that India might be one of the first nations to reach an agreement on the new US tariffs.

Roadblocks

Indian government officials informed Reuters that the US has yet to agree to India’s demands for concessions on existing tariffs on steel and auto parts, and a rollback of the proposed 26% reciprocal tariff scheduled for July 9.

“The U.S. side first wants India to commit to deeper import tariff cuts on farm goods like soybeans and corn, cars and alcoholic beverages along with easing of non-tariff barriers,” a source was quoted as saying in the report. 

An Indian delegation is anticipated to visit Washington ahead of the deadline, the report revealed. However, discussions might now prioritise a comprehensive agreement over a hastily arranged interim deal.

India, under Prime Minister Narendra Modi, is actively working to establish itself as a vital US ally. This effort includes attracting American companies such as Apple, which is part of a broader strategy to diversify supply chains away from China.

However, trade negotiations have faced difficulties in advancing.

The first source indicated India’s keenness, but not desperation, to finalise a deal before the July 9 deadline. 

According to the source, India had offered tariff reductions on almonds, pistachios, and walnuts, and was prepared to extend preferential treatment for American imports in sectors such as energy, autos, and defence.

However, sources indicated that a direct intervention by Modi and Trump could still lead to a last-minute breakthrough.

Partnership

Indian officials emphasised a lasting commitment to the US as a reliable economic ally, even as they assert policy independence despite the current stalemate.

In February, Modi and Trump had reached an agreement to finalise the initial stage of a bilateral trade deal by autumn 2025. 

They also set a goal to increase trade from approximately $191 billion in 2024 to $500 billion by 2030.

India is also actively pursuing free trade agreements (FTAs) to mitigate potential policy changes under a Trump administration in the US. 

This includes ongoing discussions with the European Union for a pact expected later this year, and recently concluded negotiations for an FTA with the United Kingdom.

Ram Singh, head of the Indian Institute of Foreign Trade, a government funded think-tank, was quoted in the report:

The ball is now in the US court. India is not for any win-lose trade partnership.

Should a worst-case scenario unfold, India is positioned to absorb the impact of reciprocal tariffs, the report said. This is due to its sustained tariff advantage when compared to rivals such as Vietnam and China.

US tariff hikes averaging 10% in early April appear to have had a limited impact, as India’s exports to the US increased to $17.25 billion in April-May from $14.17 billion a year earlier.

The post Donald Trump’s tariff deadline looms as India-US trade deal faces hurdles appeared first on Invezz

The recent rise in retail sales growth in China due to stimulus measures is just temporary, according to Commerzbank AG. 

The policy impact is unlikely to be long-lasting, the German bank said. 

A significant increase in loss-making businesses indicates a gloomy outlook for business confidence and employment, subsequently impacting consumer confidence.

“Therefore, Beijing has a lot more work to do if the policymakers want to prioritize lifting consumption as one of the key policy goals,” Tommy Wu, senior economist at Commerzbank AG, said in a report. 

Strong industrial output and higher-than-anticipated retail sales growth indicate a robust first half of 2025.

Both grew by approximately 6% year-on-year in real terms during April-May.

These figures indicate that GDP might surpass our expectations again in Q2, potentially growing over 5% year-on-year, following a 5.4% growth in Q1, Wu said.

Consumption stimulus programs lack lasting effects.

Retail sales have benefited from the government’s trade-in program, which offers subsidies for major consumer purchases like home appliances, cars, and consumer electronics. 

However, the program has faced challenges. 

By early June, over half of the CNY300 billion allocated by Beijing for this year’s trade-in program had already been distributed.

This high consumer participation has led to local governments quickly exhausting their subsidy funds.

Local governments may soon receive the remaining program funds from the central government.

Wu said:

However, in our view, it is unclear whether consumer confidence has actually improved, given that the outlook for jobs and incomes has remained uncertain.

Despite hovering around zero in recent months, CPI inflation has failed to reverse the weak underlying demand, a trend exacerbated by a worsening PPI deflation of (-)3.3% in May. 

This suggests the protracted deflationary cycle since 2023 will be difficult to overcome.

Since 2023, the GDP deflator, a comprehensive indicator of economy-wide prices, has remained in deflationary territory.

To survive weak demand, firms are cutting prices, exemplified by China’s auto market price war where some EV models saw over one-third price reductions. 

This aims to attract demand despite government stimulus supporting auto and other big-ticket consumer goods.

“This is a reflection of how weak the underlying consumer demand has been,” Wu added. 

Private sector weakness hits job creation

Deflation has significantly impacted corporate profitability, with the proportion of loss-making firms rising from just under 10% in 2011 to 23% in 2024. 

This increase is primarily attributable to the private sector.

Although the surge in loss-making private companies since 2021 can be partially linked to the current real estate downturn, this upward trend began much earlier, in 2017.

Market competition appears to have been consistently intense, leading to a build-up of over-capacity.

A lack of profitability and weak confidence will deter businesses from hiring.

“As the problems of overcapacity and employment are structural, Beijing needs to allow and initiate meaningful reforms and consolidation in various industries to resolve these problems,” Wu said. 

Limitations

Due to a lack of tax and land sales revenues, the government sector must increase its borrowing, a necessity driven by the slow economy and ongoing housing downturn, according to Commerzbank.

By 2025, the central government’s debt is expected to be under 30% of GDP, which is low when compared internationally. 

However, local government debt, encompassing both official debt and that from local government financing vehicles, is projected to exceed 100% of GDP according to the German bank’s calculations.

It has been widely contended that the central government has the capacity to assume a greater debt burden on behalf of local administrations.

“While this is true to some extent, we believe there is a limit as to how much more debt the government can carry,” Wu added.

Fiscal limitations are likely to eventually curb the current policy stimulus.

Our concern is that, once the stimulus slows or even stops, the macro picture will worsen again.

The post Commerzbank sees China economic growth slowing in second half of 2025 appeared first on Invezz

The current outlook for gold and silver prices remain uncertain as the daily moving average convergence and divergence continues to fall back to neutral levels, experts said. 

Gold is set for considerable weekly losses on Friday, with new risks of decline appearing before the release of the US Personal Consumption Expenditures (PCE) Price Index data.

Gold prices are testing a crucial daily support level as the US dollar (USD) stabilised after its overnight rebound from a more than three-year high.

Dhwani Mehta, senior analyst at FXStreet, said in a report:

Traders refrain from placing any directional positions in the Greenback and Gold price before the release of the Fed’s preferred inflation measure, the core PCE Price Index, due later this Friday.

At the time of writing, the most-active gold contract on COMEX was at $3,308.10 per ounce, down 1.2% from the previous close. 

Declining safe-haven demand 

Brian Lan, managing director at GoldSilver Central, Singapore, attributed this week’s price dip to the Israel-Iran peace deal. 

He added that prices are consolidating with a slight downward bias and are expected to remain around current levels.

After 12 days of the most intense confrontation between Iranians and Israelis, a ceasefire took effect on Tuesday, allowing both sides to resume normal life.

Moreover, the threat of closure of the Strait of Hormuz, an important trading route for commodities, diminished.

This further alleviated concerns over supply disruptions of oil, metals and agricultural products. 

As concerns diminished, the safe-haven appeal for commodities such as gold and silver also weakened, thereby limiting demand among investors. 

Economic data and interest rates

In May, the annual core PCE Price Index is anticipated to rise by 2.3%, up from April’s 2.1% growth. 

On a monthly basis, the index is projected to increase by 0.1% in May, matching April’s pace. 

Should core PCE readings exceed expectations, it could fuel speculation that the US Federal Reserve might begin lowering interest rates as early as July, Mehta said.

Market expectations currently indicate a 63-basis-point rate reduction this year, commencing in September.

“Therefore, the data will hold key to determining the timing of the next Fed rate cut, significantly impacting the USD-denominated and non-yielding Gold price,” Mehta added.

Speculation arose that US President Donald Trump’s challenge to the Fed’s credibility might result in the appointment of a dovish successor, dubbed a ‘lame duck,’ which negatively impacted the dollar.

Technical outlook

David Morrison, senior market analyst at Trade Nation said:

The current outlook for gold remains uncertain, as it continues to consolidate, and as the daily MACD continues to fall back towards neutral levels.

Morrison added that silver prices are also experiencing something similar after moving above $36 per ounce. Prices are likely to consolidate around this level. 

Gold is currently retesting bids below the 50-day Simple Moving Average (SMA) at $3,325. This comes after successfully defending this strong support level earlier in the week.

A new downtrend could be confirmed if the weekly closing price falls below the 50-day SMA support, according to Mehta.

“Ahead of that, the $3,295 demand area will be retested, which is the intersection of the weekly low and the 38.2% Fibo level of the same ascent,” FXStreet’s Mehta. 

The post Gold outlook shaky as markets look for economic direction appeared first on Invezz

The United States and China have formally finalized a trade understanding first reached last month in Geneva, a move that could ease tensions between the world’s two largest economies.

The deal, which includes a Chinese commitment to deliver rare earth minerals essential to key US industries, was signed two days ago, US Commerce Secretary Howard Lutnick said in an interview with Bloomberg.

“They’re going to deliver rare earths to us” and once they do that, “we’ll take down our countermeasures,” Lutnick told Bloomberg News in an interview.

The materials, vital for manufacturing in sectors ranging from defense to green energy, had become a point of friction in recent years.

China’s Commerce Ministry echoed Lutnick’s announcement, confirming that the agreement’s framework had been finalized and that Beijing would continue its system of export permits for controlled items.

Lutnick also added that the White House has “imminent plans to reach agreements with a set of 10 major trading partners”.

Markets cheer progress in trade talks

The trade deal helped lift investor sentiment, with Asian equities and European futures posting gains.

A key gauge of global stocks touched a fresh record high amid optimism that further trade agreements could follow.

The finalized US-China deal represents a key milestone after repeated setbacks in earlier talks, including accusations from both sides over the past year of breaching informal accords.

However, the agreement remains contingent on future actions, particularly China’s timely and consistent export of rare earth supplies.

A White House official confirmed that the terms of the Geneva accord have now been formally codified and will guide implementation going forward.

White House targets trade deals with 10 nations

Beyond the China deal, the Biden administration is preparing to finalize a broader package of trade agreements with as many as 10 key trading partners.

Lutnick said these pacts would be prioritized in alignment with President Donald Trump’s July 9 deadline, when paused tariff increases are due to be reconsidered.

“We’re going to do top 10 deals, put them in the right category, and then these other countries will fit behind,” Lutnick told Bloomberg Television.

While he did not disclose which nations are included in the initial round of negotiations, Trump hinted that India is among them.

A team of Indian trade officials led by chief negotiator Rajesh Agarwal is in Washington this week for talks aimed at resolving differences and moving toward a deal.

Japan, another major trading partner, is also engaged in negotiations. Its chief trade negotiator, Ryosei Akazawa, departed for Washington this week for a seventh round of talks.

Japan has raised concerns over US plans to impose 25% tariffs on automobiles.

At a press briefing in Tokyo, Japanese Chief Cabinet Secretary Yoshimasa Hayashi acknowledged awareness of Lutnick’s comments but declined to provide details.

“Japan and the US are currently discussing the series of US tariff measures, and we will continue to make our utmost efforts on the matter as our top priority,” he said.

As the July 9 deadline approaches, Washington appears to be using the China deal as a springboard for reshaping trade ties more broadly, aiming to reduce tariff risks and bring more predictability to global trade.

The post US-China sign trade deal, 10 more with trading partners ‘imminent’: report appeared first on Invezz