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Sacha Tihanyi, Deputy Head of Emerging Markets Strategy at TD Securities notes that the BCB remained dovish yesterday and reiterated that economic conditions require the level of the interest rate to remain below its so-called structural level.

Key Quotes

“There were certain mark-to-market adjustments in the statement (relating to inflation risks) that acknowledged that external risks, and factors that can lead to an expansion in Brazil’s risk premium, have increased.”

“We think that while we don’t expect the BCB to move on rates until Q1 of 2019, the election remains a substantial risk and one that the BCB may be forced to react to if the market reaction to the election outcome is sufficiently negative for BRL.”