HALISTER1: Brazil Copom Minutes to Clarify Neutral Rate, Cycle: Analysts

Brazil Copom Minutes to Clarify Neutral Rate, Cycle: Analysts

(Bloomberg) -- (Machine translation provided by Google and reviewed by Bloomberg editors.)
  • Copom Minutes that will be released on Thursday should bring further clarification on points in the Central Bank’s statement, such as the issue of a neutral interest rate, and help the market strengthen its bet on increasing the rate of interest rate cuts to 1ppt or restore the expectation of 0.75ppt.
  • NOTE: Before the Carnaval holiday, the interest rates market forecast a cut of 92.62 basis points in the April Copom meeting, suggesting a greater chance of increasing the pace
  • Credit Suisse says in a report signed by Nilson Teixeira, Leonardo Fonseca, Paulo Coutinho, Lucas Vilela and Iana Ferrao, that it will wait for the minutes before making any change in its Selic scenario of 9.5% at the end of the year
  • Market to want to understand the magnitude of the cycle and try to take some of the signaling in the Copom minutes, says Arnaldo Curvello, director of Ativa Wealth Management, in a telephone interview
  • Copom’s statement suggested the possibility of a faster pace of monetary easing and may clarify conditions for this, BBH says in a note released by e-mail and signed by Marc Chandler, Win Thin and Mavashi Murata
  • In view of the clarity of the announcement and guidance, we expect the Copom minutes to add little new relevant information, but that may offer a more detailed discussion and vision of what could maintain (or potentially intensify) the current pace of -0.75pp, says Goldman Sachs in a note signed by Alberto Ramos, Mauro Roca and Paulo Mateus, sent by email
    • Bank expects Copom minutes to reinforce message of the statement, with Copom being slightly more constructive on scenario for activity, more comfortable with disinflationary dynamics and perceiving a more favorable balance of risks for inflation
    • Given the statement’s enphasis on structural interest rate as a potential guide to the extension of the current cycle, and eventually a more “frontloaded” rate of cuts, says Goldman, “we will be looking in the minutes for additional discussion about this and perspectives on this new parameter as a driver for future monetary policy decisions”
  • NOTE: In the statement of the meeting that reduced the Selic by 0.75 ppt to 12.25% last week, the Copom pointed out that the extension of the cycle of monetary easing will depend on neutral interest rate estimates for the Brazilian economy, which put reforms currently underway in Congress in the spotlight
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Alberto Ramos (Goldman Sachs Group Inc/The)
Arnaldo Augusto Curvello (Ativa Corretora)
Mauro Roca (Goldman Sachs Group Inc/The)
Nilson Teixeira (Banco de Investimentos Credit Suisse Brasil SA)

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