Brazil Central Bank cuts Selic rate by 50bps to 10.75%, as expected, while committee members unanimously anticipate a further reduction of the same magnitude in the next meeting

Says:

• Forward guidance is contingent upon scenario evolving as expected.


• This monetary policy stance is appropriate to keep the necessary contractionary monetary policy for the disinflationary process.


• Total magnitude of easing cycle over time will depend on the inflation dynamics, expectations and projections, output gap, balance of risks.


• Current context requires serenity and moderation in the conduct of monetary policy.


• Reinforces need to persist with contractionary monetary policy until disinflationary process consolidates and inflation expectations anchor around targets.


• Baseline scenario has not changed substantially.


• Local economic activity remains consistent with the expected scenario of deceleration.


• Headline consumer inflation remains on a path of disinflation.


• Various measures of underlying inflation are closer to the inflation target in recent releases.

Analysis details (20:23)

BCB REVIEW: The COPOM voted to cut the Selic rate by 50bps to 10.75%, in line with the consensus. But analysts noted that the central bank tweaked its forward guidance, which might suggest it will lower the rate of reductions in the meetings ahead. Since August, policymakers have said that the Selic rate would be lowered by the same magnitude (of 50bps) at the "next meetings", although that was changed to "next meeting" in the latest statement. Accordingly, some analysts see a 50bps cut at the May meeting, but risks that the central bank will slow the magnitude of cuts to 25bps in June. "Another 50bps cut at the next meeting in May to 10.25% seems highly likely," Capital Economics said, "the change in the forward guidance doesn’t preclude another 50bps cut at the subsequent meeting in June, but with the strength of the labour market likely to keep services inflation elevated, we think the balance on Copom will tip towards 25bps cuts by then."

20 Mar 2024 - 21:36- Fixed IncomeImportant- Source: Newswires