April 23, 2024 14:26 GMT
JP Morgan Now Expect The BCB To Cut By 25bp In May
BRAZIL
- The combination of recent global financial tightening and the government’s decision to reduce the 2025 primary target from +0.5% to 0% of GDP has led JP Morgan to reduce their rate cut expectations for the BCB. They now expect the COPOM to cut by 25bp in May, rather than the 50bp they guided for previously. JP Morgan now look for three 25bp back-to-back cuts in the next meetings, with a terminal SELIC of 10% (vs. 9.5% previously).
- JPM note that the extent and pace of the cutting cycle will still be very dependent on domestic inflationary pressures and GDP growth. However, fiscal and external dynamics should be particularly important in dictating the terminal rate. On the first, JPM see rising chances of disappointment, while on the latter they see increasing probability of a scenario where Fed rates remain high-for-longer. As a result, risks to their 10% SELIC forecast are still tilted to the upside.
- JPM’s forecast change tallies with the BCB’s latest Focus survey, which earlier today showed an increase in analysts’ year-end SELIC rate forecasts to 9.5% this year (from 9.13%) and 9.0% next year (from 8.5%).
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