Itaú BBA - Copom Cockpit: the easing cycle continues

Macro Brazil

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Copom Cockpit: the easing cycle continues

octubre 25, 2019

We believe the Copom will cut the Selic rate to 5.0% at its next week's meeting


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

• The Brazilian Central Banks’ Monetary Policy Committee (Copom) meets again next week. We expect the Copom's inflation forecasts in the market scenario (which includes exchange and interest rates according to the Focus survey) to remain stable at 3.3% for 2019 and 3.6% for 2020. In the reference scenario (which assumes constant exchange and interest rates), estimates will likely retreat to 3.3% in 2019 (from 3.4%) and to 3.5% in 2020 (from 3.6%).

• We expect the Copom to reduce the Selic rate to 5.00% p.a. at its meeting on October 29 and 30. We believe that, given the drop in the neutral real interest rate, additional monetary stimulus is needed for a more robust economic recovery. In addition, we see no risk of demand-side inflation in the coming years, even if activity picks up faster than expected. Thus, we see room for even lower interest rates ahead, with the Selic rate at 4.5% by the end of 2019 and 4.0% in 2020.
 

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



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