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Bank of America Forecasting a 25BP Selic Rate Cut to 13.50%

BRAZIL
  • BofA expect the Copom to cut the selic rate by 25bp, to 13.50% on the 02-03 May meeting.
  • With inflation expectations until 2026 now stable (though de-anchored), tightening in domestic credit conditions, the continued cooling of inflation (and underlying measures) and a slowdown in activity, the message should be more positive.
  • Government´s efforts with the fiscal framework bill of law should be mentioned as a factor that lowered uncertainty around the public debt trajectory. On the external backdrop, BofA expect the Copom to highlight the still high uncertainty of banking and financial conditions.
  • BofA expect a downward revision to the 2023 inflation forecast, particularly due to the change of the committee's energy tariff flag expectations to green (instead of yellow), given the positive energy supply conditions.
  • They see significant risks for the Copom to hold the selic rate at 13.75% and delay the cutting cycle, however.

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