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Scotiabank Expect This Week’s Hike Will Likely Be Flagged As The Last

BRAZIL
  • The BCB will meet on Wednesday and most market participants will be looking for a signal around where the bank stands on its rate hiking cycle.
  • One more hike is all but guaranteed (consensus +50bps; BNS +75bps), which would bring the Selic rate from the current 12.75% to the 13.25–13.50% range. The question from here is whether the cycle is complete, or a continuation of further tightening is ahead.
  • It’s likely that this week’s hike will be flagged as the last, as messaging at the May meeting hinted toward this outcome.
  • However, expect the bank to flag current inflation, elevated inflation expectations, and proposed fiscal policies alongside the October general elections as reasons for potential hikes down the road.
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  • The BCB will meet on Wednesday and most market participants will be looking for a signal around where the bank stands on its rate hiking cycle.
  • One more hike is all but guaranteed (consensus +50bps; BNS +75bps), which would bring the Selic rate from the current 12.75% to the 13.25–13.50% range. The question from here is whether the cycle is complete, or a continuation of further tightening is ahead.
  • It’s likely that this week’s hike will be flagged as the last, as messaging at the May meeting hinted toward this outcome.
  • However, expect the bank to flag current inflation, elevated inflation expectations, and proposed fiscal policies alongside the October general elections as reasons for potential hikes down the road.