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Daniel Sinigaglia, Latam Economist at Standard Chartered, expects  Brazil’s monetary policy committee (COPOM) to keep rates at 6.50% when it meets today.

Key Quotes

“Since the latest meeting on 20 June, the underlying conditions for monetary policy decisions have improved significantly. In particular, several of the inflation risks underlined in the latest Banco Central do Brasil (BCB) communications have taken a more constructive turn.”

“Domestically, the truckers’ strike in late May appears to have produced a transitory inflation uptick, according to recent consumer price data and surveys. In addition, a more stable external risk backdrop in July has provided increased support for emerging-market sentiment.”

“These factors will likely allow COPOM to continue to pursue its “lower for longer” strategy, though much will depend on potential volatility created by the general election in October. USD-BRL has fallen 5.1% in July, helping to anchor currency expectations at 3.70 for both 2018 and 2019. BCB has reduced FX swap interventions (from USD 38bn to zero between June and July), a reflection of lower market volatility.”