4 Mar 2015
Brazil warms up for further rate hikes – TDS
FXStreet (Edinburgh) - Cristian Maggio, Head of Emerging Markets Research at TD Securities, expects the Brazilian central bank (BCB) to announce further hikes in the April meeting.
Key Quotes
“We expect the BCB to hike another 100bp in total with a terminal Selic rate at 13.25% at the April 29 meeting, with risks skewed to the upside (13.50-13.75% also quite likely)”.
“But the high likelihood that the Copom may hike rates beyond the 13% mark also means that we now see the possibility of rates cuts earlier than we had previously expected”.
“Our expectation is for a shallow easing cycle to start early in 2016 or by end-2015, and we forecast -125bp in total, with rates back to 12.00% by end-2016”.
“The greatest challenge for the BCB will be to put inflation expectations under control while trying not to kill growth more than necessary, and avoid unnerving markets more than they already are (the BRL is already the worst performing EMFX in a three month period)”.
Key Quotes
“We expect the BCB to hike another 100bp in total with a terminal Selic rate at 13.25% at the April 29 meeting, with risks skewed to the upside (13.50-13.75% also quite likely)”.
“But the high likelihood that the Copom may hike rates beyond the 13% mark also means that we now see the possibility of rates cuts earlier than we had previously expected”.
“Our expectation is for a shallow easing cycle to start early in 2016 or by end-2015, and we forecast -125bp in total, with rates back to 12.00% by end-2016”.
“The greatest challenge for the BCB will be to put inflation expectations under control while trying not to kill growth more than necessary, and avoid unnerving markets more than they already are (the BRL is already the worst performing EMFX in a three month period)”.