Itaú BBA - Selic rate to remain stable at today’s Copom meeting

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Selic rate to remain stable at today’s Copom meeting

March 20, 2019

We believe that the committee will keep the Selic rate stable at 6.5% p.a.

Talk of the Day


Day Ahead: The BCB’s Monetary Policy Committee (Copom) will hold its monetary policy meeting. With inflation forecasts anchored around the respective targets up to 2021, in a context where the level of slack in the economy remains high, we believe that the committee will keep the Selic rate stable at 6.5% p.a. Given recent speeches by new Copom members, we would not be surprised if the communication highlighted the weak economic activity recovery. Nevertheless, we believe that the committee will continue to signal an asymmetric balance of risks, biased towards inflation. See our full report on our expectations about today’s meeting here.


Consumers were still pessimistic in February. An unfavorable one-year outlook for the economy as well as the respondent’s evaluation of their current well-being meant consumers’ confidence was still bleak in the month, according to think-tank Fedesarrollo. While still an improvement over twelve months, there was a deterioration at the margin, following two months of gains. Consumer confidence sits at -5.6% (0 = neutral) compared to the -7.8% one year ago and -2.8% in January. Relative to February 2018 (-7.8%), individual households believe they are economically worse off than one year earlier: -18.5% from -11.4% in February 2018 (-8.9% in January). Meanwhile, despite the sub-index that evaluates the one-year outlook for the economy improving in twelve months (-25.7% vs. -28.5% one year ago; -20.7% in January), it remains deep in pessimistic ground and the main drag on confidence. Contrasting the poor economic outlook, lifting confidence is the individual households’ belief that they will be better off in the next year (to 26.0% from 20.7% on year ago; 26.6% in January). The still slow activity recovery amid a loose labor market may partly explain why confidence remains low. However, going forward we believe low inflation along with an expansionary monetary policy and a broadly stable exchange rate will aid the consumer outlook and support a continuation of the consumption recovery. We expect an activity pick-up this year to 3.3% (2.7% in 2018).

Day Ahead: At 12:00 PM, the central bank will publish the trade balance for January. We expect a trade deficit of USD 1.0 billion (USD 386 million deficit last year), as oil exports remain a drag.


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