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.
MNI BCB Preview - September 2022
Executive Summary
- The BCB are believed to be either at or very close to the peak of its tightening cycle that has seen the Selic rate raised 1175bps to 13.75%.
- Annual headline inflation has begun to reverse substantially, and inflation expectations have followed suit. This has led consensus to believe the BCB have concluded policy tightening already.
- Nonetheless, continued pressure on services and core inflation alongside above-expectation growth indicators have prompted some to forecast a cycle ending 25bp hike, bringing the Selic rate to 14.00%.
Full preview including summary of sell-side views here: MNI Brazil Central Bank Preview - September 2022.pdf
Central Bank Rhetoric Leaves Door Open For Cycle-Ending Hike
The latest commentary from BCB officials, including Governor Campos Neto, has left September’s Copom decision hanging in the balance between an unchanged decision and a cycle ending 25 basis point hike, culminating in a terminal Selic rate of 14.00%. The central bank governor said the BCB will evaluate the need for an additional final hike in September speaking at an event organized by local newspaper Valor Economico on September 05. Campos Neto added the central bank still needs to send “strong message” despite improvements on inflation.
There were additional comments from BCB Director, Bruno Serra, who expressed the opinion that Brazil’s disinflationary process is still very incipient. He indicated that the central bank has been surprised in the past and that they must remain cautious. Additionally, Serra noted that 2024 inflation expectations (that had crept above target) bothered him.
At face value, the above comments appear clearly hawkish in relation to this Wednesday’s decision, but analysts are divided as to whether they suggest a final hike or whether, as Barclays suggest, they are “mostly expressing discomfort with an early pricing of rate cuts by the market”.
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.