This month's key takeaways for the Brazilian Real:
• The Brazilian stock market index is the worst performer of the year.
• Among the factors driving the currency lower has been the fear that the government will increase public spending ahead of next year’s presidential election regardless of the likely inflationary consequences of such spending.
• Pressure for a looser fiscal policy in Brazil is likely to persist, and the market’s expectations are that the spending cap will be cast aside in the coming years.
• The central bank picked up the pace of its rate hikes given the increase in its inflation projections.
• The BRL slipped further and, quarter to date, has become the second-worst currency behind the Turkish Lira.
• The yield curve is now pricing in a double-digit policy rate in February, reaching 11.7% by the end of 2022.
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