BCB Hawkish Tone Fails to Close Door to Long Cut Cycle: Analysts
Source: BFW (Bloomberg First Word)
People
Carlos Kawall Leal Ferreira (Banco J Safra)
Marcelo Carvalho (Banco BNP Paribas Brasil SA)
Mauricio Oreng (Banco Rabobank International Brasil SA)
Rodrigo Melo (Icatu Vanguarda Administracao de Recursos Ltda)
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UUID: 7947283
(Bloomberg) -- A long easing cycle is still on the table even after BCB statement showing cautiousness on inflation services and starting the rate cuts with a move smaller than that expected by part of the market, analysts say.
Alert: HALISTER1- Inflation closer to target and reforms progress may allow BCB to cut Selic rate by more than 500bps by beginning of 2018, Marcelo Carvalho, chief-economist for Latam at BNP Paribas, says in a phone interview
- Entire cut cycle may lead Selic to 9%, which would still be a ’’very high’’ rate compared to CPI already near 4.5% in the market forecasts for 2018
- BCB’s cautious outlook creates a doubt on previous market bet that rate cut would speed up to 50bps in November from 25bps in October, Rodrigo Melo, chief-economist at Icatu Vanguarda Administracao de Recursos, says
- Acceleration of the pace depends on next CPI figures in Oct. and Nov. showing services inflation slowing for a level seen as comfortable by BCB; also next spending cap bill votes in Congress may also be key
- “As being more prudent now, BCB increases the chances to cut more in the future,” Melo says
- While the chances of BCB keeping the 25bps cut pace in Nov. have increased, it does not close door to 50bps depending on the developments, Mauricio Oreng, senior-strategist at Rabobank Brasil, says
- BCB has adopted a cautious tone consistent with the remaining uncertainties
- DI rates today show adjustment in short and medium-end curve, reacting to BCB statement; long-end curve favored by perception that more cautiousness now benefits a disinflation process in the future, Carlos Kawall, economist at Banco Safra, says
- NOTE: DI rates rally from Nov. 16 to Jan. 21 contracts after BCB on Wednesday cut Selic by 25bps, citing services prices among main risks for the bank fight against inflation; longer contracts from Jan. 22 to Jan. 27 drop
Source: BFW (Bloomberg First Word)
People
Carlos Kawall Leal Ferreira (Banco J Safra)
Marcelo Carvalho (Banco BNP Paribas Brasil SA)
Mauricio Oreng (Banco Rabobank International Brasil SA)
Rodrigo Melo (Icatu Vanguarda Administracao de Recursos Ltda)
To de-activate this alert, click here
UUID: 7947283