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BRAZIL: JP Morgan Expects Copom’s Communication To Tilt Hawkish

BRAZIL
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  • JP Morgan expects the Copom to hike by 25bp to 10.75% next week in a unanimous decision. They expect the tone of the communication will tilt hawkish, leaving the door open to accelerate the pace and with an open-ended size of a cycle. Going forward, growth, inflation, inflation expectations and the exchange rate will be key for future rate moves. JPM sees the Copom raising the Selic rate to 11.50% by the beginning of 2025.
  • JPM doesn’t expect the statement to give clear signals about the pace and extent of the overall cycle, but it will reaffirm the Copom’s vigilance and firm commitment to the 3% target with a cautious tone, striking a balance between both forward-looking and data-dependent mode.
  • The BCB’s forecasts under the assumption of consensus’ expectations for the policy rate (11.50% peak, declining to 10.25% by end-25) should show stable short-term inflation projections, but the scenario with a stable Selic should be 0.1-0.2% higher. JPM says that the droughts across the country raise some upside risks, noting that some members see asymmetric balance of risks to inflation. However, JPM doesn’t expect the majority of the board to support this view.
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  • JP Morgan expects the Copom to hike by 25bp to 10.75% next week in a unanimous decision. They expect the tone of the communication will tilt hawkish, leaving the door open to accelerate the pace and with an open-ended size of a cycle. Going forward, growth, inflation, inflation expectations and the exchange rate will be key for future rate moves. JPM sees the Copom raising the Selic rate to 11.50% by the beginning of 2025.
  • JPM doesn’t expect the statement to give clear signals about the pace and extent of the overall cycle, but it will reaffirm the Copom’s vigilance and firm commitment to the 3% target with a cautious tone, striking a balance between both forward-looking and data-dependent mode.
  • The BCB’s forecasts under the assumption of consensus’ expectations for the policy rate (11.50% peak, declining to 10.25% by end-25) should show stable short-term inflation projections, but the scenario with a stable Selic should be 0.1-0.2% higher. JPM says that the droughts across the country raise some upside risks, noting that some members see asymmetric balance of risks to inflation. However, JPM doesn’t expect the majority of the board to support this view.