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Recent Global Stress Shouldn’t Affect BCB Actions In Short-Term: JPMorgan

BRAZIL
  • JPMorgan expect BCB to cut the policy rate by 50bp to 12.25% in a unanimous decision this week, as widely anticipated by markets and the consensus of forecasters. Since BCB is still in the early stages of its easing cycle, the recent global stress shouldn’t affect BCB’s actions in the short term. Domestic fundamentals, with a confirmation of some deceleration in 3Q GDP and contained inflationary pressures, suggest that the cutting cycle should go on for now.
  • In the statement, JPM see BCB keeping the guidance of maintenance of the 50bp pace for the next meetings (plural), stating that rates should remain above neutral for the time being.
  • Elsewhere, the wording of the statement should be tweaked to sound more cautious to account for the more uncertain global scenario. BCB should also continue avoiding to give clear guidance about the extent of the cycle, which is very likely to continue to be characterized as data dependent.
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