30 Apr 2015
Further tightening expected in Brazil – Scotiabank
FXStreet (Edinburgh) - In light of the recent hike by the BCB, Eduardo Suarez, Chief FX Strategist at Scotiabank, sees the central bank extending the tightening cycle in the upcoming months.
Key Quotes
“The short statement only said that the COPOM unanimously supported the decision, which was taken taking into consideration the macro‐scenario, and the outlook for inflation”.
“Our base case is that the BCB will deliver two more 25bps hikes, before going into a pause period, but we will need to wait for the minutes to re‐assess”.
“However, the other data item that was released yesterday could be a risk to our monetary policy view… the central government balance for March came in much weaker than anticipated (BRL1.5bn vs BRL3.2bn expected), which could further fuel concerns over the risks to the fiscal target”.
“It will be interesting to see if this result has an adverse impact on inflation expectations, or if FinMin Levy is given the benefit of the doubt until the negotiations on the fiscal adjustment formally succeed, or sink”.
“It will be interesting to see how DI rates react today, but as of last night, they were fully pricing in a +25bps in the next meeting, as well as 80% chance of an additional +25bps”.
Key Quotes
“The short statement only said that the COPOM unanimously supported the decision, which was taken taking into consideration the macro‐scenario, and the outlook for inflation”.
“Our base case is that the BCB will deliver two more 25bps hikes, before going into a pause period, but we will need to wait for the minutes to re‐assess”.
“However, the other data item that was released yesterday could be a risk to our monetary policy view… the central government balance for March came in much weaker than anticipated (BRL1.5bn vs BRL3.2bn expected), which could further fuel concerns over the risks to the fiscal target”.
“It will be interesting to see if this result has an adverse impact on inflation expectations, or if FinMin Levy is given the benefit of the doubt until the negotiations on the fiscal adjustment formally succeed, or sink”.
“It will be interesting to see how DI rates react today, but as of last night, they were fully pricing in a +25bps in the next meeting, as well as 80% chance of an additional +25bps”.