Itaú BBA - Evening Edition – Copom meeting to take center stage in Brazil tomorrow

Latam Talking Points

< Back

Evening Edition – Copom meeting to take center stage in Brazil tomorrow

June 18, 2019

We believe that the Copom will maintain the Selic rate stable at 6.5% per year.

Talk of the Day

Brazil

Tomorrow’s Agenda: The Monetary Policy Committee (Copom) will publish its monetary policy decision tomorrow, at 6:00 PM. We believe that the Copom will maintain the Selic rate stable at 6.5% per year, given the monetary authority's unwillingness to change the level of stimulus until there is greater clarity about the prospects for economic reforms – particularly the pension reform. We expect rate cuts to come only after the approval of the reform in the first round of voting in the Lower House, which we now expect to take place in July. Going forward, we believe that the combination of weak economic activity with below-target inflation and benign inflationary outlook should open up room for additional monetary stimulus, which would take the Selic rate to 5.0% in 2019, with the policy rate unchanged at this level in 2020.

Argentina

Tomorrow’s Agenda: At 4:00 PM, GDP figures for 1Q19 will be published, for which we forecast a 5.7% yoy decline (-0.2% qoq/sa), in line with the official monthly GDP proxy. At the same time, the INDEC will publish labor market indicators for 1Q19. We expect the labor market to show a new deterioration on a year-over-year basis, in line with the contraction in economic activity and the job destruction registered in the first quarter of this year.

Colombia

Tomorrow’s Agenda: Think-tank Fedesarrollo will publish consumer confidence for the month of May. An expansionary monetary policy alongside low inflation could support consumer confidence, but weaker than expected growth in 1Q19 showed signs that the impact of weakening global growth could be filtering through to the Colombian economy, increasing downside risks to the activity and confidence outlook.



< Back