BCB Preview: Keeping the speed of rate cuts - Rabobank

Mauricio Oreng, Senior Brazil Strategist at Rabobank, suggests that for the Copom policy meeting, they stand along the broad consensus (and market prices) forecasting a cut of 75bps to 12.25% p.a. in the benchmark Selic rate.

Key Quotes

“We expect no major changes in the policy message by the Copom, hinting at more easing (probably at the current pace) ahead.”

“In our view, there has been limited amount of time and evidence for the BCB to override its own signal about a new pace of easing. Back-to-back surprises do not seem to be on the menu for a central bank that has been so keen to improve communication with the market.”

“We continue to see mounting downside risks to our Selic rate projections for both end-2017 (9.50%) and mid-2018 (9.00%). While our long-held single-digit Selic call for 2018 became largely consensual now, the new “terminal” rate could be even lower than we had thought.”