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Goldman Sachs Expect Unchanged Selic Rate And Unanimity

BRAZIL
  • Given the recent domestic and external macro-financial developments and recent hawkish public statements by several Copom members, Goldman Sachs expect the Copom to leave the Selic policy rate unchanged at 10.50% on Wednesday, in a unanimous decision. Beyond the rate decision, market focus will be on whether it is a unanimous or split vote, and in case of a split decision who are the directors dissenting.
  • In their view, the most hawkish scenario would be a unanimous hold, with the balance of risks for inflation shifting to asymmetric to the upside and forward guidance hinting that the Copom will be on hold for a while. A dovish outcome would be a unanimous 25bp rate cut, with open ended guidance for the August meeting. This scenario would likely intensify the pressure on the BRL and inflation expectations.
  • In their assessment, resuming the easing cycle will likely require a combination of improved balance of risks for inflation, friendlier services inflation dynamics, lower inflation expectations, better anchored BRL, inflation forecasts more aligned with the 3.0% target over the relevant horizon, and possibly, also a friendlier external backdrop.
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