HALISTER1: Brazil CPI Report Error Doesn’t Change 100bp Rate Cut Call: BTG

Brazil CPI Report Error Doesn’t Change 100bp Rate Cut Call: BTG

(Bloomberg) -- “Message about next week’s Selic rate decision - clearly in favor of a 100bps cut - was contained in the very wording of the report, instead of relying on any indirect inference based on the conditional forecasts,” according to report signed by analysts led by Eduardo Loyo.
  • Keeps call for 100bps cut next week, 9% terminal level for Selic rate
  • Correction didn’t affect conditional forecasts under assumption that Selic will decline in accordance with market consensus
    • Correction altered the implied sensitivity of inflation to Selic, which would be important if no scenario pointed to on-target CPI, thus being necessary to calculate “how far rates could move in order to deliver inflation convergence”
  • NOTE from April 4: BCB corrects inflation report to add lower CPI forecasts
  • NOTE: Brazil Central Bank: It’s possible rates fall below structural

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Eduardo Henrique De Mello Motta Loyo (Banco BTG Pactual SA)

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