27 Apr 2016
Brazil COPOM Preview: Staying put for now - Rabobank
Mauricio Oreng, Senior Brazil Strategist at Rabobank, notes that since the last meeting of the Copom (monetary policy committee) – on March 02, 2016 – macro and market developments have been broadly favorable for the Brazil’s medium-term inflation outlook.
Key Quotes
“Although these events may have reduced a bit the perception of inflation risks by the Committee, the recent movements still seem insufficient to radically change the current policy stance and forward guidance (stable rates for now). Especially amid lingering (domestic, global) uncertainties.
We believe the Copom will probably choose to keep a similar statement as in recent meetings, buying time and flexibility. Our scenario hastwo rate cuts (50bps) in the last meetings of 2016 (October 19, November 30), taking the Selic to 13.25%. Still, a lasting solution for Brazil’s fiscal woes remains a necessary condition for the upcoming easing cycle to mean convergence towards friendlier neutral rates (and not just temporary cuts).”
Key Quotes
“Although these events may have reduced a bit the perception of inflation risks by the Committee, the recent movements still seem insufficient to radically change the current policy stance and forward guidance (stable rates for now). Especially amid lingering (domestic, global) uncertainties.
We believe the Copom will probably choose to keep a similar statement as in recent meetings, buying time and flexibility. Our scenario hastwo rate cuts (50bps) in the last meetings of 2016 (October 19, November 30), taking the Selic to 13.25%. Still, a lasting solution for Brazil’s fiscal woes remains a necessary condition for the upcoming easing cycle to mean convergence towards friendlier neutral rates (and not just temporary cuts).”