Brazil: One more final cut in this easing cycle – Rabobank

FXStreet Team FXStreet

The Copom members cut the Selic (policy) rate by 75bps to a new historical low of 3.00%, economists at Rabobank brief. USD/BRL is sitting at 5.7159.

Key quotes

“The BCB’s Copom cut the Selic policy rate by 75bps to a new historical low of 3.00%. Moreover, the Copom considers one more final cut in this easing cycle.”

“The revised inflation simulations by the BCB seem to indicate room for further cuts following this move. Even assuming until yearend the maintenance of such higher levels of FX rate (USD/BRL around 5.55), with the Selic brought down to 2.75% by yearend, would not be enough to bring IPCA back up to the target midpoint of 3.75% in 2021.”

“We now see the Copom cutting 75 bps in the 16-17 June meeting, with the Selic ending the year at 2.25%, and we foresee the policy rate at 3.25% by the end of 2021.”

Author

FXStreet Team

FXStreet

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