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BRAZIL: Santander Still Sees 15.50% Terminal Selic Rate, Focus On Guidance

BRAZIL
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  • Santander says that the BCB’s reference scenario may lead to a worsening of the IPCA projection in the relevant horizon, but not enough to prevent the Copom from delivering the 100bp hike signalled for January today, which will bring the Selic to 13.25% per year.
  • A key question is whether the Copom will maintain the "double guidance" of 100bp hikes not only for March, which is already anticipated, but also for May. In their view, the guidance for an adjustment of the same magnitude in March should remain, with the outlook for May staying flexible. Worsening macro conditions make it hard to justify a reduction in pace, but the committee could prefer to gain degrees of freedom given the tightening of financial conditions and potential for weaker activity from Q2 2025 onward.
  • Meanwhile, there is no room for the BCB to hesitate in its hawkish wording while inflation expectations are rising. Santander continues to expect the terminal Selic rate to reach 15.50% in June.
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  • Santander says that the BCB’s reference scenario may lead to a worsening of the IPCA projection in the relevant horizon, but not enough to prevent the Copom from delivering the 100bp hike signalled for January today, which will bring the Selic to 13.25% per year.
  • A key question is whether the Copom will maintain the "double guidance" of 100bp hikes not only for March, which is already anticipated, but also for May. In their view, the guidance for an adjustment of the same magnitude in March should remain, with the outlook for May staying flexible. Worsening macro conditions make it hard to justify a reduction in pace, but the committee could prefer to gain degrees of freedom given the tightening of financial conditions and potential for weaker activity from Q2 2025 onward.
  • Meanwhile, there is no room for the BCB to hesitate in its hawkish wording while inflation expectations are rising. Santander continues to expect the terminal Selic rate to reach 15.50% in June.