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According to analysts at Rabobank, the recently released Copom minutes from Brazil, reinforces a balanced tone and a cautious approach of the BCB towards future policy.

Key Quotes

“Amid considerable uncertainty both domestically and abroad, the authority continues to buy flexibility for itself, refraining from committing to the next steps.”

“Inflation risks are still seen skewed to the upside despite a slight recent improvement (owing to a less hawkish Fed talk). The approval of fiscal/macro reforms still seems to be the most important risk factor for the BCB now.”

“The minutes refer to a gradual recovery (despite the Q4 GDP softening) and to acceleration hinging on structural measures. In our view, those element suggest a lack of urgency by the BCB board to add monetary stimulus (like “the ball is in another one’s court”), as the Copom see their monetary stance already in expansionary territory.”

“We stick to the view that the outlook for monetary policy will highly depend on government actions on the realm of economic reforms. Our scenario (with effective reforms, gradual GDP pickup) is consistent with BCB on hold at 6.50% until next year, with more chances of further delay in the (normalizing) hiking cycle than of imminent rate cuts.”