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Brazil: Central bank to remain on hold – TDS

FXStreet (Córdoba) - Analysts from TD Securities expect that the Central Bank of Brazil will leave rates unchanged at today’s meeting.

Key Quotes:

“We expect COPOM to keep rates on hold at 14.25% today, in line with the general consensus view, and the bias in the DI market which is pricing in virtually zero probability of a hike.”

“It’s likely that in order to get inflation expectations back into line, as COPOM has stated, the central bank will have to tolerate a higher level in both the real and nominal SELIC rate, even as headline inflation falls and the economy continues to struggle.”

We see the next rate move, an easing, coming in Q4 of next year. The main risk to our view comes from the potential for sustained upside in inflation expectations, which currently risk a move above the upper bound of the actual inflation target range. Ameliorating factors include favourable base effects in 2016, and a hopefully more stable BRL in the coming months following the Fed lift -off.”

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