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BRAZIL: JP Morgan Say Global Outlook Justifies Reassessing Their BCB Rate Path

BRAZIL
  • Contrasting the messages laid out by the board with their own forecasts, JP Morgan remains of the view that rates will be kept at 10.50% over coming meetings, as a hike would require further deterioration of the inflation outlook (expectations and market prices)—a high bar in the absence of new shocks. 
  • However, following JPM’s updated house view on more aggressive Fed easing and its repercussions for economies across EM, they have decided to reassess their BCB monetary policy path, and not in the hawkish direction the minutes suggested.
  • While increasing their conviction in the call for stable rates in the near term, JP Morgan note that recent developments also opened room for discussing the relative stance and an easing cycle over the medium-term. 
  • JPM now see a window of opportunity for moderate cuts by mid-2025—in sharp contrast with the market pricing of over 120bp in hikes over the next 12 months.
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