MNI WATCH: BCB To Hike 100BP As Signaled, Eyes On May Guidance
MNI (BRASILIA) - The Central Bank of Brazil is expected to hike its official Selic rate by another 100 basis points to 14.25% on Wednesday, following the forward guidance in its last decision and marking the fifth consecutive increase.
All eyes will be turn to clues in the policy statement about what the Monetary Policy Committee (Copom) might do in May, including whether it promises additional tightening at future meetings or leaves guidance open-ended and data-dependent.
According to the BCB Focus market survey, inflation is set to end the year at 5.66%, exceeding the upper limit of the 3% target tolerance range, which allows for a maximum of 4.5%. Expectations remain unanchored for longer horizons, with forecasts at 4.48% for 2026, 4.00% for 2027, and 3.78% for 2028.
TERMINAL RATE
Analysts expect the Selic rate to rise to 15% this year and then fall to 12.50% next year, reaching 10% in 2028.
The BCB raised rates by 100 basis points in January to 13.25% and signaled one more hike of the same magnitude at its next meeting.
Former deputy governor for international affairs Tony Volpon told MNI in an interview that the BCB minutes, released a week after the last decision, contain signs the board is close to the end of its hiking cycle. He added the board is likely to deliver one more 100-basis-point rate increases as guided and then stop or slow its tightening pace. (See MNI INTERVIEW: BCB Close To Ending Its Hiking Cycle - Volpon)
Former head of the BCB’s department of economic research Marcelo Kfoury also told MNI that the BCB is likely to deliver a 100bp rate hike this month, then switch to a data-dependent approach while concluding its tightening cycle with a 50bp rise to 14.75% in May. (See MNI INTERVIEW: BCB To End Hiking Cycle At 14.75% - Kfoury)