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Rabobank analysts note that for the Brazilian economy, in the minutes of last week’s Copom policy meeting (out this morning), the BCB seeks to reaffirm the flight plan of rate stability in the short term.

Key Quotes

“Although the authority keeps talking down market expectations about imminent cuts, the lack of momentum in the economy prompts relevant downside risks to our call of rate stability until (at least) mid-2020.”

“In our view, for the BCB to start mulling rate cuts, it would probably have to see a clearer signal about the passing of key fiscal reforms in Congress, such as a first round approval of an effective pension reform at the Lower House floor.”

“That said, we believe market talks on immediate rate cuts might only be back in 19H2, if the pension reform advances materially in Congress and if the economy continues to disappoint.”