MNI BCB Preview – Nov 2024: Bolder 50BP Hike Expected
Executive Summary
- Unanimous survey estimates and market pricing indicate the BCB will deliver a 50bp Selic rate hike to 11.25%, after initiating a short tightening cycle in September.
- Inflation expectations continue to drift higher and together with the ongoing BRL depreciation, the central bank will be justified in stepping up the tightening pace at this juncture.
- Resilient economic growth, tight labour market conditions and fiscal uncertainties would also justify a more hawkish tone in the accompanying statement.
Click to view the full preview: MNI BCB Preview - November 2024.pdf
Fiscal concerns have continued to weigh on local assets in recent weeks, putting attention on the government’s planned spending cut package, details of which are due to be presented shortly. Planning and Budget Minister Simone Tebet said recently that it was time to muster the courage to eliminate ineffective expenditures, thereby creating room for other governmental priorities in Brazil, such as investments. She said that the economic team is preparing a package to control spending, although under President Lula’s directive, issues like the minimum wage appreciation policy will remain untouched.
Early reports suggested that the package would amount to BRL30-50bn of savings, with a first stage of cuts to discretionary spending, followed by a second stage of more structural spending cuts. However, Finance Minister Haddad said more recently that he was unaware where those estimates came from. Speaking on Monday, Haddad said that the spending cuts plan was very advanced and that details could be released this week.