MNI BCB Review - May 2021

MNI BCB Review May.pdf

• In a clear signal to the market, and in a marginally hawkish surprise, the BCB confirmed they foresee another 75 basis point rate hike at the June meeting, larger than some analyst's estimates for a smaller adjustment of 50bps.

• Key to the statement was the continued inclusion of the phrase "partial normalization" that many had anticipated may be omitted. Despite this being a potentially dovish signal, the committee indicated this guidance is not a commitment and suggested further monetary policy moves will continue to revolve around the evolution of economic variables.

• On a slightly more dovish note, the Copom published an inflation forecast under their baseline scenario for 2022 at 3.4%, at the lower range of forecasts. Additionally, core inflation measures were now characterised as being at the top end of the range compatible with meeting the target. This was a change from the previous statement where they had been described as "above the range".