Itaú BBA - Copom: door slightly ajar to further easing, but the bar is high

Macro Brazil

< Volver

Copom: door slightly ajar to further easing, but the bar is high

junio 17, 2020

The statement did not clearly close the door to additional easing, but its tone suggests that this is not the base case .


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

 

 The Copom delivered the consensus move, taking the Selic to 2.25%pa, in a unanimous vote. The meeting statement did not clearly close the door to additional easing, but its tone suggests that this is not, at this stage, the base case. The Copom indicates that “eventual” additional easing would be “residual”. Eventual, in Portuguese, primarily means an event that is uncertain, that may or may not happen. And residual is self-explanatory. While the committee indicates that it is open to revisiting this assessment, depending on changes of the inflation outlook, which might open the door for extra easing, given the benign short term inflationary dynamics, it also conditions its future course of action on the evolution of the pandemic and on a reduction of fiscal uncertainty – the latter is unlikely to materialize before the next Copom. 

 All things considered, even though further easing is still in the cards, we believe the Copom will leave the base rate unchanged until year-end, at 2.25%pa. We will learn more about the committee’s thinking with the release of the policy meeting minutes on Tuesday, June 23, at 08:00 AM, Brasilia time.


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



< Volver