BCB Preview: Going 50 or 75? – Rabobank

Mauricio Oreng, Senior Brazil Strategist at Rabobank, suggests that the markets will see a live Copom policy meeting on Wednesday (January 11) and while they stick to their call for a 50-bp Selic rate cut to 13.25%, part of the market projects a bolder move (75bps).

Key Quotes

“We see this is as a close call.”

“With analysts/market inclined towards a 50-bp move, we believe the BCB will chose to implement stimulus gradually. The idea is to minimize risks for inflation expectations, which have only recently converged towards 4.5% (after years strolling above the mid-target).”

“Both the decision and communication will be important to assess the next steps. For now, we keep our baseline scenario of Selic cuts to 11% this year and 9% next year, with risks skewed towards faster moves than we have pencilled in.”