Brazil’s easing cycle likely not over – TDS

Strategists at ‘Rates, FX and Commodities Research’ at TD Securities believe the Brazilian central bank could lower further its Selic rate in the next meeting.

Key Quotes

“The BCB minutes will be released on Tuesday, and perhaps will give hints as to the degree to which the central bank will ease off of its cutting cycle”.

“We believe that the language of the policy statement suggested that it is likely that the BCB moves to a 75bps cut at the next meeting, however there may be some degree of risk of even less easing, but this will depend on how the BCB feels the lack of further fiscal reform impacts Brazil’s structural interest rate”.

“On a Y/Y basis, May inflation is expected to continue to drop to sub-4%, and will likely continue to keep easing until base effects ebb post-August, providing the BCB with no real near term concern at this point”.