Headline: Brazil's Inflation Slows Less Than Expected, Adding to Policy Challenges
Key Points:
* Brazil's annual inflation rate reached 4.5% in early January, exceeding market expectations.
* Despite a drop in energy costs, inflation remains elevated, pressuring policymakers to raise interest rates.
* The central bank plans to hike the benchmark Selic rate by 100 basis points next week to 13.25%.
* Concerns persist over Brazil's currency being dragged down by President Lula's spending ambitions.
* Underlying inflationary pressures remain high, excluding volatile food and energy prices.
* Food and beverage prices rose 1.06%, while transportation costs increased due to rising airfare.
* Swap rates indicate market expectations of further monetary tightening if underlying inflation doesn't improve.
* The government is exploring measures to reduce grocery bills and close the budget gap, but concerns over spending remain.
* Global markets are being impacted by President Trump's tariff plans.