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Goldman Sachs Note Inflation Dynamics Support Continuation Of Gradual Easing Cycle

BRAZIL
  • Goldman Sachs note that the above consensus IPCA-15 CPI data today were driven in part by higher-than-expected food and transport inflation. Core and core-services printed broadly in line, with core decelerating 20bp to 3.87% y/y, but core services firming 8bp to 5.07% y/y.
  • In their assessment, the inflation dynamics support the continuation of a gradual easing cycle, but the core-services inflation underlying dynamics merit attention. A tight labour market backdrop, expansionary fiscal policy, still unanchored inflation expectations and tight services inflation fundamentals demand caution in the near-term calibration of monetary policy.
  • Meanwhile, GS note that today’s Copom minutes conveyed a broadly similar signal to that of the post-meeting statement and were overall more conservative. All in, they expect the Copom to cut the Selic rate by 50bp at the May meeting, with the totality of the data and overall balance of risks for inflation to dictate whether the Copom will deliver another 50bp rate cut at the June meeting, or downshift to a more cautious 25bp cut.
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