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BRAZIL: HSBC Expects Copom To Hike By 50bp In Unanimous Decision

BRAZIL
EM BulletBulletGlobalEmerging Market NewsRegion
  • HSBC sees the Copom picking up the pace and delivering a 50bp increase to 11.25% this week, given that inflation expectations now exceed the upper limit of the target range. They see the base rate at 11.75% by 2024-end and a terminal rate of 12.25% by March 2025.
  • A 50bp hike has been expected by market participants for some time, particularly since the publication of the hawkish communiqué soon after the last meeting. In that communication, the Copom presented a set of inflation forecasts that explicitly suggested that the median expected analyst scenario for rates wouldn't suffice to drive inflation to the centre of the target range.
  • HSBC expects a unanimous decision this week and for the Copom to remain data dependent. Keeping the door open for possible shifts in the pace of hiking seems to be the appropriate strategy in the current environment of high volatility. Domestically, the strong pace of economic growth seen in Q2 decelerated moderately in Q3, according to most high frequency indicators. However, the labour market remained tight, both in terms of job creation and wage growth, suggesting that the Copom's previous assessment of a positive output gap remains valid into the next meeting.
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  • HSBC sees the Copom picking up the pace and delivering a 50bp increase to 11.25% this week, given that inflation expectations now exceed the upper limit of the target range. They see the base rate at 11.75% by 2024-end and a terminal rate of 12.25% by March 2025.
  • A 50bp hike has been expected by market participants for some time, particularly since the publication of the hawkish communiqué soon after the last meeting. In that communication, the Copom presented a set of inflation forecasts that explicitly suggested that the median expected analyst scenario for rates wouldn't suffice to drive inflation to the centre of the target range.
  • HSBC expects a unanimous decision this week and for the Copom to remain data dependent. Keeping the door open for possible shifts in the pace of hiking seems to be the appropriate strategy in the current environment of high volatility. Domestically, the strong pace of economic growth seen in Q2 decelerated moderately in Q3, according to most high frequency indicators. However, the labour market remained tight, both in terms of job creation and wage growth, suggesting that the Copom's previous assessment of a positive output gap remains valid into the next meeting.