MNI BCB Review - October 2022: Remaining Vigilant

Executive Summary

• At the October 26 meeting, the BCB unanimously decided to keep the Selic rate unchanged at 13.75%, in line with expectations. Previously, some members of the committee had favoured a 25bp rate hike and so the October meeting indicates all policy makers are now aligned.
• A hawkish posture has been maintained within the statement, emphasising it “will remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation.”
• The committee also reinforced that “future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected.”
• Analysts saw little innovative information from this meeting and consensus seems to be building around rate cuts commencing in June 2023, with the risks tilted slightly towards the second half of the year for monetary easing. Analysts also continue to assign a non-zero risk that the BCB may have to hike rates further if the trend for inflation were to worsen over the coming months.
• Yesterday’s decision is unlikely to have any lasting impact on BRL assets, with Sunday’s election Runoff between President Bolsonaro and former President Lula in clear focus.

Click to view the full review: MNI BCB Review - October 2022.pdf