Itaú BBA - Copom: a hawkish cut?

Macro Brazil

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Copom: a hawkish cut?

marzo 18, 2020

The Copom reduced the Selic rate to 3.75% pa and stated that, for now, they see base rate stability as adequate.


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

 

 The authorities ended up delivering the outcome that was (mostly) priced in, a 50-bp rate cut, in an unanimous decision. This takes the Selic to 3.75% pa (we had been expecting a more moderate move). As in its previous meeting, the committee goes out of its way to moderate market appetite for additional easing. It states that doubts about the continuity of fiscal reform may turn additional easing moves counter-productive, as they might result in tighter financial conditions. The statement also indicates, explicitly, that for now the authorities see base rate stability, at the new level, as adequate, whilst conceding that they are dealing in an especially uncertain scenario. We believe the Selic will end the year at 3.25%, with additional easing, once the worst of the Coronavirus-related financial market stress eases, but not necessarily in the next policy meeting. We will learn more about the committee's strategy with the release of the meeting minutes on Tuesday, March 24, at 08:00 AM Brasilia time.


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



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