Brazil: BCB to increment the pace of easing to 100bps - TDS

In view of the analysts at TDS, today’s key event is the BCB’s rate announcement and their estimate of the output gap, as well as the evolution of underlying inflation dynamics in Brazil has led them to forecast additional easing this year.

Key Quotes

“We believe this will be more front-end loaded than before, with further easing past September contingent on developments in pension reform as well as the BCB’s estimates of Brazil’s structural interest rate.”

“We see the BCB incrementing the pace of easing to 100bps at today’s meeting, cutting the Selic rate to 11.25%—in line with consensus—followed by another 100bps in May, tapering to 50bps in July and September respectively. This should set the terminal Selic rate at 9.25%.”