Analysts at Rabobank point out that in the minutes of last week’s Copom policy meeting, we saw the committee even more emphatic on the scraping of the forward guidance, amid a scenario of high uncertainty.
Key Quotes
“On the scenario assessment, the BCB highlights the (uncertain, noisy) activity and inflation impacts from recent transportation system stoppages, clouding the analysis for some time.”
“The BCB continues to stress on the will to fight only secondary effects from recent shocks in relative prices. No mechanical relationship between those and the next policy steps.”
“We believe that, with recent communications, the BCB seeks to buy more flexibility for itself amid rising uncertainties both at external and domestic levels.”
“If the current shocks aggravate or propagate (to CPI, expectations), chances for a rate hike could not be dismissed.”
“Our baseline scenario continues to count on Selic rate on hold at the historical low of 6.5% for considerable time (i.e. late 2019-early 2020, if fiscal reforms pass and Fed hikes end soon).”
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