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JPMorgan Forecasting 9.5% Selic Rate By Mid-2024

BRAZIL
  • JPMorgan look for a fourth consecutive 50bp cut in the policy rate, to 11.75%, in a unanimous decision. The focus then will once again turn to any changes to the balance of risks and/or the forward guidance.
  • It seems that as the Brazilian economy is performing well amid elevated local and global uncertainty, the BCB would prefer to keep the 50bp pace and assess the scenario as it cautiously cuts the SELIC rate.
  • Given the remaining risks, a decision to eliminate the plural on the forward guidance at this moment, in JPMorgan’s view, would cause excess volatility in the short end of the curve in the next weeks, and would lead the market to price an acceleration of the pace already for the next meeting.
  • JPM expect that BCB will continue to signal a 50bp easing pace over the coming meetings, but with some more dovish language tweaks in the post-meeting statement and the minutes. This would be consistent with our call of BCB cutting rates to 9.5% by mid next year in 50bp clips with a final 25bp cut.
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