Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary
- Following the anticipated rate cut from the Federal Reserve on Wednesday, the BCB is conversely expected to begin a tightening cycle at its September meeting.
- Consensus points to a 25bp Selic rate hike to 10.75% on the back of de-anchored inflation expectations, robust growth and pressure on the exchange rate this year.
- The shift in analyst projections in recent weeks has been striking, with the median estimate swinging firmly toward expectations of tighter monetary policy.
- Although most analysts expect a 25bp move, the range of forecasts is from unchanged to a bolder 50bp move, highlighting the importance of the accompanying statement/guidance from the BCB committee.
Click to view the full preview: MNI BCB Preview - Sep 2024.pdf
MNI (LONDON)
BCB Communication Points to Start of Tightening Cycle
Recent communication from BCB officials suggest that the central bank is set to embark on a relatively short-lived tightening cycle this week, amidst a continued climb in inflation expectations, strong activity data and a weakening currency in 2024. At the end of August, BCB Governor Campos Neto said that the central bank was very worried about CPI convergence and that if and when rates are adjusted, it will be gradual, as he noted that inflation expectations are still unanchored. He also said that he saw risk premium in the market that’s not compatible with the central bank’s message, implying that he anticipated a less aggressive tightening cycle than what the market was pricing.
All 22 analysts in the Bloomberg survey expect the Copom to hike the Selic rate by 25bp to 10.75% this week. However, some analysts in the sample below see scope for a 50bp move, while SocGen expects the Selic rate to be left unchanged.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.