Itaú BBA - Copom Cockpit: 50bp-cut on the way

Macro Brazil

< Volver

Copom Cockpit: 50bp-cut on the way

julio 26, 2019

We expect the Copom to start a new easing cycle with a 50bps cut on July 31st


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

• The Brazilian Central Bank's Monetary Policy Committee (Copom) meets again next week. The Copom's inflation forecasts in the market scenario (which includes exchange and interest rates according to the Focus survey) should remain at 3.6% for 2019 and 3.9% for 2020. In the reference scenario (which assumes constant exchange and interest rates), forecasts will likely remain at 3.6% in 2019 and recede to 3.6% in 2020 (from 3.7%).

• In our view, recent data are consistent with the start of a more intense easing cycle, with a reduction of 50bps in the Selic base rate in next week’s meeting. In addition to the approval of the pension reform by a wide margin of votes and its greater-than-expected fiscal impact, developments in recent weeks consolidated the expectation of a 25-bp cut by the U.S. Federal Reserve a few hours before Copom’s decision.

• Down the road, we expect the 50bp-cut in the Selic on July 31 to be followed by two other reductions of the same magnitude in the September and October meetings, driving the base rate to a final level of 5% p.a. before year-end.
 

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



< Volver