Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI BCB Preview - June 2022
Executive Summary
- The Copom are widely expected to hike the Selic rate by 50bps to 13.25% at their June meeting.
- The more significant issue will be whether the updated guidance within the statement signals the end of the hiking cycle or if the BCB wishes to retain optionality for future meetings.
- Given recent developments, both domestically and across global markets, the probability of additional tightening beyond Wednesday’s decision have increased.
Click to view the full preview: MNI Brazil Central Bank Preview - June 2022.pdf
Despite prior rhetoric suggesting that a May hike could be the final step in their campaign against inflation, the last Copom statement had a clear hawkish tilt amid ongoing global price pressures. Following the 100 basis point Selic rate hike in May, the committee clearly stated that they foresee a further extension of the tightening cycle in June “with an adjustment of lower magnitude”.
Analysts are almost unanimous in expecting a 50bp hike in June, however, the guidance will be closely scrutinised in equal measure for any hints surrounding potential future hikes. While headline inflation for May came in below estimates, broader developments point towards the Copom being unable to comfortably end the tightening cycle.
Inflation Expectations Continue to Deteriorate
Headline annual inflation dipped to 11.73% in May, from 12.13% in April and below the surveyed median estimate of 11.88%. While the data may be mildly encouraging, it is worth noting that within the most recent Focus Survey (for week ending June 3), economists are now predicting year-end 2022 inflation to settle at 8.89%, substantially higher than the 7.65% before the May meeting. Additionally, 2023 year-end projections now lie at 4.39% from 4.0%, providing further evidence of the continued contamination of medium-term expectations.
Source: Brazil Central Bank
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.