HALISTER1: BCB May Delay Cut After Brazil CPI Higher Than Est.: Analysts

BCB May Delay Cut After Brazil CPI Higher Than Est.: Analysts

(Bloomberg) -- Higher-than-est. mid-mo. CPI may delay the start of a BCB rate-cut cycle, analysts say.
  • While baseline scenario calls for a cut at July 20 meeting, BCB may postpone until August if the current pressure fails to cede, Roberto Padovani, economist at Banco Votorantim, says in a phone interview
  • Relatively smooth swap rates reaction to CPI result is due to risk-on in external markets, which has led BRL to gain, Padovani said
    • Since political shift in Brazil materialized, local assets have been following external markets, especially the outlook on Fed rates
  • High level of CPI is “concerning” as it occurred during a period of positive seasonality for inflation: Padovani
  • “Complex and uncertain” inflation outlook “validates and justifies” BCB guidance that “high level of annual inflation and expectations that are still distant from the inflation target do not offer room for monetary policy easing in the near-term,” Goldman Sachs economist Alberto Ramos said in a note
  • NOTE: Brazil CPI +0.86% m/m through mid-May; median est. +0.76%, highest est. +0.82%; y/y 9.62% vs est. 9.51%
  • NOTE: BCB duty is to ensure CPI target is met, FinMin Meirelles told Correio, a Brazilian newspaper
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Roberto Padovani (Banco Votorantim SA)
Alberto Ramos (Goldman Sachs Group Inc/The)

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