Itaú BBA - Copom: Selic rate moving towards 5%

Macro Brazil

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Copom: Selic rate moving towards 5%

septiembre 18, 2019

The statement indicates that another 50-bp “adjustment” of the base rate is likely in the October meeting.


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

 

• The Copom cut the Selic rate to 5.5% p.a., in a unanimous decision, as widely expected. The statement indicates that another 50-bp “adjustment” of the base rate is likely in the October meeting. Interestingly, the authorities allude to a hybrid scenario, with constant exchange rate (at BRL/USD 4.05) and lower interest rates (following market consensus) that yields forecasts at 3.4% in 2019 and 3.8% in 2020, against targets of 4.25% and 4.00%, suggesting that the current exchange rate level is no impediment for further easing. Actually, the post-meeting statement, particularly its forecasts, suggest that the Copom might test even lower levels of the benchmark rate, in case their projections fall some more. For now, we expect another 50-bp rate cut in October, and will wait for additional central bank communication and data, including the coming meeting minutes (out on Tuesday, September 24) and quarterly inflation report (out on Thursday, 26), to reassess our call.


 

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



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