The BCB is widely expected to end its easing cycle, but remain dovish thanks to repressed inflation projections over the coming two years. BRL will not be affected by the expected decision but comments of unorthodox monetary policies can hit the real, according to economists at TD Securities.
Key quotes
“We expect the BCB to cut one final 25bp step and continue to sound sufficiently dovish.”
“The BCB only expects a brief breach of the 2021 3.75% inflation target, but that this breach will remain well within the tolerance range. This leads us to believe that the BCB has no reason to sound concerned with upside inflation dynamics due to low rates, at least any time soon.”
“BRL will not be affected by the expected decision, however, any indication of unorthodox monetary policies under consideration, now or in the future, may harm the currency.”
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