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Brazil: BCB to stay on-hold and maintain cautious tone - Rabobank

Analysts at Rabobank point out that for the forthcoming Copom meeting, which is scheduled to be held on December 11-12, analysts and traders are widely expecting the BCB to hold the Selic rate at the historical low of 6.50%.

Key Quotes

“Despite effects of downside surprises in current inflation (i.e. inertia, expectations) we believe the BCB could maintain a lightly hawkish bias, sticking to a language of asymmetric risks and readiness to act if outlook/risks deteriorate. With global and local pictures looking fluid, risky, we believe the BCB will probably retain a cautious tone.”

“At this juncture we think that not only this is not the timing to hike, but also that this time may be quite far off, should pending fiscal reforms pass in Congress next year.”

“If key reforms go through, tame inflation expectations, wide economic slacks and supported asset prices would clearly maintain a favourable inflation outlook, even with a declining centre target path. That makes our (long-held) baseline call of Selic rate on hold at 6.50% all across 2019.”

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