Itaú BBA - Copom Cockpit: Stable Selic rate in December

Macro Brazil

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Copom Cockpit: Stable Selic rate in December

diciembre 7, 2018

Brazil´s Monetary Policy Committee (Copom) meets again next week and we expect it will maintain the Selic rate stable at 6.5% p.a.


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. Copom's inflation forecasts will likely decline for 2018 in both scenarios, market (which includes exchange and interest rates according to the Focus survey) and reference (which assumes constant exchange and interest rates), compared to those published in the most recent monetary policy meeting, in October. For 2019, the inflation forecast will probably recede in the market scenario and remain stable in the reference scenario. For 2020, the inflation forecast will probably show a slight increase in the market scenario and stability in the reference scenario.

With lower inflation forecasts in 2018 and showing relative stability in the following year, in a context where the level of slack in the economy remains high, we believe that the Copom will maintain the Selic rate stable at 6.5% p.a. at the December meeting. In this context, with economic data observed since the last meeting surprising to the side of lower inflationary pressure and with the outlook of continuity of the reforms, in particular, the fiscal one, we believe that the risks to the inflation scenario have once again become more balanced. Thus, we think the Copom may remove the references to asymmetry in the balance of risks for inflation from its communication. As observed in the last meetings, the committee will probably refrain from making more direct signals regarding its next steps in order to maintain flexibility in a still substantially uncertain context, both domestically and internationally.
 

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

 



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