COPOM REVIEW

As expected, the Copom left the Selic rate unchanged at 2.00%. Citing that price shocks were more persistent than expected and that inflation projections for its baseline scenario, are now sufficiently close to the inflation target over the relevant horizon, they decided to remove their forward guidance. With analysts divided on whether this may happen at this meeting, the decision constitutes a marginally hawkish surprise.

Going forward, the Copom will now place greater emphasis on the conditional inflation forecasts for 2022, and the more demanding 3.50% target. Monetary policy will now follow the usual assessment of the balance of risks for prospective inflation. Given the committee continued to highlight the upward asymmetry to the balance of risks for inflation, the risk of an earlier than expected lift-off have increased, in line with recent market price adjustments.

JPMorgan - COPOM opened the door for action by removing the FG and adding that "at this moment" the uncertainties prescribe an extraordinarily strong monetary stimulus. Historically, the "at this moment" wording has been associated with the BCB aiming to keep all options available.

Still think that the normalization cycle will take longer to start, and they keep call that the COPOM will start hiking only in August, leaving SELIC at 3.5% at the end of this year.

Goldman Sachs - The Copom removed the Forward Guidance and added a couple of hawkish innovations to the policy statement. We are adjusting our Selic rate path forecast: earlier liftoff (May/June, from August) and more frontloaded profile (+150bp hikes in 2021, up from 75-100bp).