Halister News

(Bloomberg) -- “Rate cuts early in 2018 will depend critically on whether projected inflation for 2019 is at or below the 4.25% target and the respective balance of risks,” Alberto Ramos, Latin America chief economist at Goldman Sachs, writes in a report after the release of last Copom minutes.

• Signal of 50bp cut in December meeting seems quite clear; beyond that, Copom is not committing to any particular move, but leaving the door open for additional rate cuts of an unspecified magnitude (-25 or -50bp) at the February meeting
  • Data, balance of risks for growth-inflation "will determine whether the Copom sees room, if any, for additional rate cuts during 1Q2018”
• "At this juncture the conditional inflation forecasts do not give the green light to push the Selic below 7.00% without assuming some degree of inflation risk versus the target in 2019-2020,” Ramos writes in the report
  • Cyclical economic recovery seems to be broadening; given usual lags of monetary policy, any near-term monetary stimulus beyond Selic at 7% would end up impacting final demand in 2H18 and 1H19, when the economy may already be growing and further stimulus may no longer be really needed
• NOTE: BCB said this morning that it would refrain from providing investors with guidance about the future path of interest rates, keeping its options open as policy makers wind down their biggest easing of monetary policy in a decade

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Giulia Camillo