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Ex-BCB Director Sees Potential For Central Bank Dovish Turn

BRAZIL
  • According to Tony Volpon, a former director at Brazil’s central bank, the worsening credit outlook amid troubles facing local retailer Americanas SA raises the risk of a recession that could lead the BCB to change its balance of risks at its next meeting.
    • “At the very least, the central bank committee should change the balance of risks at the next meeting, which would be a signal to start cutting its rate in May”.
  • According to Volpon, high interest rates and worsening of credit in the midst of the Americanas case may reduce investment and increase the risk of a drop in economic growth, Volpon stated that “if the BCB does nothing, it is almost certain that there will be a recession”.
  • For reference, the next Copom decision is scheduled for March 22 where there has been no expectation for anything other than an unchanged decision. However, ongoing criticism from the administration as well as the credit scenario may have the potential to spur expectations of a relatively dovish U-turn at this juncture.
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