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Goldman Sachs Expect Copom To Offer Open-Ended Guidance At June Meeting

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  • Given the recent macro-financial developments and the guidance provided at the May 4 meeting, Goldman Sachs expect the Copom to hike the Selic policy rate by 50bp (moderating from the 100bp hike in May), driving the Selic policy rate to 13.25%; further into restrictive territory.
  • GS expect the Copom to offer open-ended guidance at the June meeting, while hinting at a possible end-cycle early August hike.
  • They assess some probability of a hawkish Copom surprise: +75bp rate hike to 13.50% with guidance/language suggesting that the Copom intends to keep the policy rate at a significantly restrictive level for the foreseeable future (i.e. for a prolonged period of time).
  • A higher-than-expected hike in June combined with an end-cycle signal could also be justified by the expectation of impending approval of legislation that significantly reduces the federal and state-level taxation of fuels (gasoline, diesel, ethanol) and energy, which could have a visible impact on the expectation for end-22 inflation (though part of that impact would be reversed in 2023).
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  • Given the recent macro-financial developments and the guidance provided at the May 4 meeting, Goldman Sachs expect the Copom to hike the Selic policy rate by 50bp (moderating from the 100bp hike in May), driving the Selic policy rate to 13.25%; further into restrictive territory.
  • GS expect the Copom to offer open-ended guidance at the June meeting, while hinting at a possible end-cycle early August hike.
  • They assess some probability of a hawkish Copom surprise: +75bp rate hike to 13.50% with guidance/language suggesting that the Copom intends to keep the policy rate at a significantly restrictive level for the foreseeable future (i.e. for a prolonged period of time).
  • A higher-than-expected hike in June combined with an end-cycle signal could also be justified by the expectation of impending approval of legislation that significantly reduces the federal and state-level taxation of fuels (gasoline, diesel, ethanol) and energy, which could have a visible impact on the expectation for end-22 inflation (though part of that impact would be reversed in 2023).