Brazil: BCB to cut rates by 50bps – TDS

Analysts at TD Securities and the market is expecting the BCB to cut rates by 50bps, and to continue indicating further easing.

Key Quotes

“With inflation contained at or below target for projections through 2020, and with the Brazilian economy still operating with a great degree of slack, we see little constraint to not only a 50bp cut by the BCB at the October meeting, but also the risk that our forecast for a further 25bps in easing past October will be found to be ex-post too hawkish.”

“BRL will remain beholden to broad USD movements, and the prospects of further fiscal (tax) reform. Greater easing will emphasize this dynamic, though this remains a longer term factor rather than having an impact at the October meeting should the BCB sound increasingly dovish.”