BCB PREVIEW: Investors Eye 2nd Half Rate Cuts If Govt Changes
(Bloomberg) -- Even though the benchmark Selic rate is expected at 14.25% for the 7th consecutive BCB meeting this week, potential political change may open room for cuts in the second half, according to economists.
- BCB meets April 26-27; all 31 economists surveyed by Bloomberg forecast an unchanged decision; DI market also mostly prices in rate on hold
- Change may come from statement, showing that Tony Volpon and Sidnei Marques, dissenting Copom members that voted for a hike at last meeting, have shifted vote for stability as inflations risks have been mitigated, Cristiano Oliveira, economist at Banco Fibra said
- Copom voting change may be a ’’first step’’ toward a future cut, even though BCB may avoid further signals
- Inflation cores and expectations easing, BRL rising have been positive for prices scenario
- Forecasts potential four 50bps cuts in 2H, starting in July
- “We are assuming that a new government will pick an orthodox economic team. Fiscal and monetary policies may help each other. Today, the fiscal policy doesn’t contribute”
- Luiz Eduardo Portella, Modal Asset Management treasurer, said in a phone interview that they expect four 50bps Selic cuts in 2H, depending on the next BCB president; “our expectation considers a government change”
- “Copom’s statement should show a different result. It should be neutral, eliminating the sign that two directors voted for a 50bps hike”
- Data released since last meeting point to a less complex monetary policy scenario, with economic activity still declining and inflation expectations starting to recede, Itau, Brazil biggest private bank, says in a report written by economists including Ilan Goldfajn
- “This improvement, alongside the recent exchange rate appreciation, will likely reduce the Copom’s inflation forecasts”
- NOTE: Senate likely to approve President Rousseff’s impeachment in mid May, surveys held by country’s main newspapers show; VP Temer, potential new president, is in contact with former BCB Meirelles and other names seeking to form a policy team
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Cristiano Oliveira (Banco Fibra SA)
Dilma Rousseff (Federative Republic of Brazil)
Ilan Goldfajn (Itau Unibanco SA)
Luiz Portella (Banco Modal SA)
Michel Temer (Federative Republic of Brazil)
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