Itaú BBA - Copom minutes: Still pointing to a 50-bp cut in September

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Copom minutes: Still pointing to a 50-bp cut in September

August 6, 2019

The minutes indicate another 50bps cut in September and we expect a Selic rate to reach 5.0% by the end of 2019


For the version with all charts and tables, please open the attached pdf file
 

• The Copom minutes, released this morning, bring a lengthy assessment of the effects of social security reform on neutral rates – which should trend lower gradually – as well as the contours of a more benign inflation outlook. Interestingly, the authorities also refer to the easing of financial conditions (which, at the time of the meeting, embedded 100-125bp rate cuts). On economic activity, the committee again points out that recent data suggest the possibility of a gradual recovery and expects some growth acceleration in the second half of this year. All things considered, we reckon the text indicates towards another 50bps in the September 17/18 policy meeting. The future thereafter is less clear, but we still expect the base rate to end the year at 5.0%, given the weakness of the recovery and the benign inflation outlook.
 

For the version with all charts and tables, please open the attached pdf file



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