Analyst Updates Following BCB Minutes

Following the Copom Minutes, the following analysts have updated their calls on upcoming rate hikes in Brazil:

*JPMorgan - Have been reinforcing that the risks of earlier hikes were rising. Timing will be data and event dependent. Especially important to follow the next developments on politics and activity, and the market reaction to both.

If we consider only the communication, particularly the views of the more hawkish members, the Committee could go ahead and hike in the next meeting. However, if our assessments of the data and political developments are correct, the present timeline should call for a first hike only in May. We thus change our call for the COPOM starting the cycle in May with a 25bp hike, followed by 50bp instalments until the SELIC reaches 3.75% in September.

*Goldman Sachs - Found the minutes hawkish (more so than the post meeting policy statement), signalling near-term rate hikes with upcoming data on the evolution of the pandemic, economic activity, and fiscal policy key to define the lift-off date.

Expect lift-off to take place in May/June and for +150bp of Selic hikes in 2021. Given the hawkish language in the minutes they do not rule out lift-off as soon as the March 17 meeting. In a few words, the current interest carry is too low and therefore it would be prudent for the Copom to normalize policy a bit earlier and faster in order to protect the 2022 inflation target and hedge against a less benign balance of risks for inflation.