Brazil: COPOM to cut the Selic rate by 100bps to 9.25% - TDS

In line with the almost unanimous consensus, analysts at TDS expect COPOM to cut the Selic rate by 100bps to 9.25% at today’s meeting, thanks to very favorable external market conditions and weaker inflation outcomes, trumping monetary caution previously necessitated by an elevation of political risk factors.

Key Quotes

“We expect one more 100bp cut in September, followed by the BCB holding rates and ending the easing cycle, as real rates will be left sitting well below the decade average. The policy outlook is highly uncertain given political circumstances, however without further fiscal reform, or greater certainty regarding Brazil’s structural interest rate, the risk of over-easing increases.”