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Dec 3, 2015
Brazil: COPOM minutes to be closely watched – TDS
FXStreet (Delhi) – Research Team at TDS, suggests that the Copom minutes of the November 25 meeting will be closely watched.
Key Quotes
“Why? When the Selic rate was left unchanged at 14.25% as unanimously expected, two Copom members (Correa-Marques and Volpon) voted for +50bps. In light of a divided committee, market perceptions on monetary policy have been erring on the hawkish side since the announcement.”
“The Copom also amended the communiqué by dropping the comment “The Committee understands that maintaining this level of the basic interest rate, for sufficiently long period is necessary for the convergence of inflation to the target in the relevant horizon for monetary policy. The COPOM emphasizes that monetary policy will remain vigilant to achieve this goal.” This suggests that, given factors such as inflation expectations, Copom no longer is as resolute in keeping the SELIC rate at 14.25% indefinitely, and passively waiting for inflation convergence to target, which increased upside pressure on DI rates. Markets will look for more clarity in the minutes to confirm whether the BCB is likely to hike rates again, when and how much.”
“Also of interest, look out for October IP, mkt –10.4% Y/Y and not too far off the –10.9% print in Sept. After the horrible Q3 GDP figures, we look for an indication that the worst of the recession is behind and expect a marginal improvement in the performance of economic activity—albeit from a very low level—in Q4 2015. Finally, Congress should vote today on the fiscal target, after the budget has been enriched at the last moment on Tuesday by the inclusion of the CPMF (financial transaction tax).”
Key Quotes
“Why? When the Selic rate was left unchanged at 14.25% as unanimously expected, two Copom members (Correa-Marques and Volpon) voted for +50bps. In light of a divided committee, market perceptions on monetary policy have been erring on the hawkish side since the announcement.”
“The Copom also amended the communiqué by dropping the comment “The Committee understands that maintaining this level of the basic interest rate, for sufficiently long period is necessary for the convergence of inflation to the target in the relevant horizon for monetary policy. The COPOM emphasizes that monetary policy will remain vigilant to achieve this goal.” This suggests that, given factors such as inflation expectations, Copom no longer is as resolute in keeping the SELIC rate at 14.25% indefinitely, and passively waiting for inflation convergence to target, which increased upside pressure on DI rates. Markets will look for more clarity in the minutes to confirm whether the BCB is likely to hike rates again, when and how much.”
“Also of interest, look out for October IP, mkt –10.4% Y/Y and not too far off the –10.9% print in Sept. After the horrible Q3 GDP figures, we look for an indication that the worst of the recession is behind and expect a marginal improvement in the performance of economic activity—albeit from a very low level—in Q4 2015. Finally, Congress should vote today on the fiscal target, after the budget has been enriched at the last moment on Tuesday by the inclusion of the CPMF (financial transaction tax).”