Surprise inflation drop triggers rate-cut rally amid climate and debt headwinds.

The Ibovespa closed Friday up 2.96% at 177,866 points — its biggest daily move since March — while the dollar slipped 0.29% to R$5.1068. The catalyst was a single figure: June's IPCA, which decelerated to 0.16% from 0.58% in May, undershooting market expectations and igniting a rally that swept from fixed income into equities. Rate futures moved in tandem with force; the DI contract for January 2028 retreated from 14.04% to 13.83%, and the January 2029 contract eased from 14.23% to 13.98%. On a day when the external backdrop remained fraught — oil rose more than 5% on the week amid the escalating war in Iran, and the U.S. is threatening a new round of tariffs against Brazil starting July 15 — the domestic disinflation surprise proved enough to override the risks and revive investor enthusiasm for further Selic cuts.

The benign IPCA reading, largely explained by falling food prices in June, immediately raised the question of what it truly reveals about the monetary path. Analysts consulted by Folha de S.Paulo were categorical: the data strengthen the case for a cut at the August Copom meeting but are not sufficient to alter the Central Bank's script, given that first-half inflation reached 3.36% — the highest for the period since 2022, according to IBGE. Folha columnist Adriana Fernandes went further, arguing that the reading retroactively shows the financial market's outcry against the BC's decision to cut the Selic by 0.25 percentage point at the last Copom meeting was overblown. Former minister Fernando Haddad, now a pre-candidate for the governorship of São Paulo, seized on the context to sharpen his criticism of the monetary authority, saying the BC "creates an unnecessary problem" by keeping rates at their current level.

The tension between the momentary improvement in inflation and the risk of deterioration in the second half is the day's connecting thread. Folha learned from members of the government's economic team that, despite June's slowdown, the official IPCA projection is likely to be revised upward — the reason is El Niño, whose impact on agricultural prices is expected to intensify in the coming months. It is a paradox that neatly encapsulates the BC's dilemma: current inflation decelerating, yet structurally pressured by the climate front and by a Treasury struggling to roll over its own debt. According to analysis published by Folha, the National Treasury has faced growing difficulty selling NTN-Bs at auction, with the market demanding elevated real yields. The workaround has been to use the liquidity cushion to redeem maturing bonds and swap them for LFTs — Selic-indexed paper that enjoys stronger demand — a pragmatic solution that nonetheless raises the floating-rate share of public debt and increases its vulnerability to swings in the benchmark rate.

While the macro debate centers on the Selic, the Banco Master scandal has dominated the institutional front and continues to reverberate with mounting force across the financial system. The Federal Police, in the tenth phase of Operation Compliance Zero launched Thursday, revealed that Daniel Vorcaro, Master's controlling shareholder, commissioned dossiers on Itaú Unibanco CEO Milton Maluhy Filho and BTG Pactual's André Esteves, as well as on journalists including O Globo columnist Malu Gaspar. The PF also identified a structured scheme to hire digital influencers to attack the Central Bank on social media and artificially manipulate ratings of the Master app. Febraban called the revelations "extremely serious," reaffirmed its support for the BC, and made clear that any attempt to intimidate executives, regulators, and journalists represents a threat to the integrity of the financial system as a whole. In parallel, BRB — Banco de Brasília, which absorbed assets from Master — has gone a full year without publishing its financial results, according to Folha, leaving the market without data to size up the true liabilities inherited from the fraudulent operations.

On the strategic front, Friday's session was marked by a far-reaching ambition announced by the Planalto Palace. President Lula summoned ministers and specialists to discuss critical minerals and rare earths, framing the topic as the "new pré-sal" — a deliberate comparison, freighted with both promise and historical warning. The government is weighing whether to enlist BNDESPar and Petrobras to take stakes in companies in the sector, alongside creating credit lines for prospecting research. Lula was explicit in invoking Trump: "If he's worried about China, he can start being worried about Brazil." Minister Alexandre Silveira urged Senate approval of the bill establishing the National Critical Minerals Policy, already passed by the Chamber, stressing the importance of controlling shareholding changes at foreign companies eyeing Brazilian assets — a direct reference to the US$2.8 billion transaction between America's USA Rare Earth and miner Serra Verde. Minister Miriam Belchior signaled that the government may advance this agenda even without final congressional approval. The initiative connects directly to geopolitical tensions with Washington: as the government awaits the new round of U.S. tariffs slated for July 15 — with the option of retaliation secured by the Reciprocity Law — Amcham Brasil, CNI, and the U.S. Chamber of Commerce sent a joint letter calling for a short-term deal to prevent an escalation of the trade dispute.

In the global energy landscape, oil's more than 5% weekly rise — the largest weekly move in two months — again highlights the strategic value of Brazilian production, which is expected to reach 4.7 million barrels per day in 2026, according to EPE. On the regulatory front, the ANP opened an ex officio investigation into the dispute between Petrobras and PPSA over access to pré-sal pipelines, a four-year-old conflict that has stalled direct commercialization of natural gas belonging to the federal government. At Cade, Petrobras, ExxonMobil, and TechnipFMC joined forces to try to block or impose restrictions on the merger between Subsea7 and Saipem, which would create one of the world's largest providers of offshore infrastructure services.

In the week ahead, markets will be watching three simultaneous vectors: Brasília's decision on how to respond to U.S. tariffs after July 15, any further signaling from the Copom on the pace of Selic cuts — particularly in light of the data