Brazilian Central Bank delivers a 100-bp cut, as expected

Copom: no surprise for now, slower easing later

The committee signaled that the next move is probably going to be a 75bps rate cut, that would take the Selic to a single digit for the first time since 2013.

The Copom took the widely expected decision, cutting the Selic by 100 bps to 10.25% p.a., without a bias, in an unanimous version. The committee signaled that the next move is probably going to be a 75bps rate cut, that would take the Selic to a single digit for the first time since 2013. We expect the Copom to cut the Selic to 9.5% p.a. in its July 25-26 meeting , and to take the base rate to 8% pa by year end – although the inflation forecasts discussed in the meeting statement point towards a slightly higher 2017 terminal rate.

The text makes it abundantly clear that the main risk factor is implementation of the reform agenda, focused on Social Security and labor laws, and attaches an economic cost to the ongoing political turmoil.

Fuente: ITAU

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