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JP Morgan Forecasts Maintenance of 50BP Cutting Pace

BRAZIL
  • Ahead of next week’s BCB meeting, JP Morgan continue to expect another 50bp cut, a pace of easing which they see extending through the coming meetings. After a weak end to last year, partly due to some payback in agriculture, they expect an acceleration of growth in early 2024, which they see sustaining at a near 2%ar pace.
  • The strength of household, corporate and banks’ balance sheets, improvements in supply-side conditions and impulse from the precatórios payment should all support growth. In their view, this should preclude the need for the BCB to accelerate the pace of rate cuts.
  • JP Morgan do not expect the recent data to interfere with this month’s COPOM decision, or with the message of maintaining the same pace at following meetings. They note that the combination of a core CPI run rate close to target and likely healthy GDP growth would be consistent with a pace of 50bp cuts ahead. They believe that there is still ample space to keep reducing the tightness of monetary policy before the SELIC rate reaches its nominal neutral rate, estimated at 8%-8.5%.
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