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Barclays on Copom: Bolder Move Could Be Justified

BRAZIL
  • Barclays expect the BCB to hike the Selic rate by 125bp, to 6.50%, taking into account the latest upside, widespread surprises in inflation and the continued deterioration in inflation expectations, and considering that BCB Governor Roberto Campos Neto repeatedly warned that the bank stood ready to do "whatever it takes" to bring inflation back to its target.
  • However, their confidence admittedly declined after Campos Neto's remarks on 14 September, saying that the Copom "will not change its flight plan after each high-frequency data that is released."
  • Still, this is the last meeting in which 2022 has more weight than 2023 in the Copom's relevant horizon for monetary policy, which could justify a bolder move should the latest Focus survey out on 20 September confirm Barclays' expectation for additional deterioration in 2022 IPCA forecasts.

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