MNI BCB Preview - Mar '25: Rate Hikes Beyond March in Question
- The Copom is widely expected to deliver another 100bp Selic rate hike on Wednesday to 14.25%, in line with the forward guidance.
- This would be the third successive 100bp move and take total tightening since September to 375bp. Of more interest will be what guidance the central bank provides for subsequent meetings.
While inflation pressures remain high, the tight monetary stance is weighing on domestic activity, raising expectations that the Copom will adopt a more data dependent approach and potentially end the tightening cycle sooner than expected.
After delivering a second consecutive 100bp hike in January, the minutes to that meeting revealed that the Board spent time discussing a possible economic slowdown, suggesting that it is close to the end of its hiking cycle. Speaking in an interview with MNI, former deputy governor for international affairs Tony Volpon said that if the Board really wanted to send a hawkish message in January, they wouldn’t have brought this up.
While the Copom maintained its guidance for another 100bp Selic rate hike at this week’s meeting, attention will therefore shift as to what guidance – if any – the Copom provides for the subsequent meetings in May and June. With growth showing signs of weakening, many analysts expect the Copom to drop the forward guidance and adopt a more data-dependent approach, with the tightening pace set to slow in Q2.