Short-term Brazilian interbank deposit rates (DIs) pared gains on Friday after domestic jobs data missed expectations, though the broader curve steepened as Federal Reserve Chair Kevin Warsh reinforced a hawkish tone at the Jackson Hole symposium.
The January 2028 DI rate ended the session at 13.805%, up 4 basis points on the day, having initially erased earlier gains following the release of the Cadastro Geral de Empregados e Desempregados (Caged) figures. The January 2035 DI rate rose 13 basis points to 14.61%, widening the long-end spread.
Brazil’s benchmark Selic rate remains at 14%. The Caged report showed formal job creation in July at 58,568, well below the 112,000 median estimate from a Reuters poll of economists.
U.S. Treasury yields extended their advance after Warsh’s remarks. The 2-year yield climbed 12 basis points to 4.354%, while the 10-year yield rose 6 basis points to 4.728%. Fed funds futures priced a 57.5% probability of a 25-basis-point hike in September, up from 35.7% earlier in the session.
Warsh emphasized that the Fed would maintain a restrictive posture until underlying inflation is clearly and durably converging toward the 2% target. "We must be confident that underlying inflation is moving toward our target, clearly and with sufficient speed. Otherwise, we have work to do," he said.
Analysts noted the shift in tone. Marcos Praça, director of analysis at ZERO Markets Brazil, said Warsh’s Jackson Hole speech struck a more hawkish note, warning that the pace of disinflation remains insufficient. Vitor Kayo, senior economist at Nomad, highlighted the labor market’s weaker-than-expected performance, suggesting a potential loss of momentum in formal employment growth.
