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22 Jan 2015
BCB hikes rates by 50bps, more to come – TDS
FXStreet (Barcelona) - Blue Macellari, Senior Strategist at TD Securities, shares that the Brazilian central bank hiked rates by 50bps, as expected, and further adds that the BCB might cut rates again by 25bps in March.
Key Quotes
“As broadly expected, the BCB’s Copom hiked rates by 50bps by unanimous decision at last night’s meeting, bringing the key Selic rate to 12.25%. The post-meeting communique was very brief, and omitted key phrases seen in the December communique.”
“As new Finance Minister Levy begins to implement what will be a broad based adjustment that is likely to ultimately be supportive of the BCB’s inflation targeting agenda, in the near term the adjustment higher of regulated prices will exacerbate what are likely to be already high inflation prints over coming months.”
“Given these changes to language, and in conjunction with the BCB’s repeated comments that they will do “whatever it takes” in order to have inflation converge to 4.5% in 2016, we fully recognize that the risk to our current forecast is that the BCB’s current cycle is both longer and more aggressive that we’ve been anticipating.”
“We do continue to expect that a more contractionary fiscal impulse will be supportive of the BCB’s goals, and that the Copom will leave rates elevated for a prolonged period of time, rather than looking to cut in the face of weak growth or the first inflation print that suggests an inflection point and the first signs that inflation is on a declining path.”
“For now, we continue to expect a further and final 25bp hike in March, but are open to adjusting this call if the minutes warrant it.”
Key Quotes
“As broadly expected, the BCB’s Copom hiked rates by 50bps by unanimous decision at last night’s meeting, bringing the key Selic rate to 12.25%. The post-meeting communique was very brief, and omitted key phrases seen in the December communique.”
“As new Finance Minister Levy begins to implement what will be a broad based adjustment that is likely to ultimately be supportive of the BCB’s inflation targeting agenda, in the near term the adjustment higher of regulated prices will exacerbate what are likely to be already high inflation prints over coming months.”
“Given these changes to language, and in conjunction with the BCB’s repeated comments that they will do “whatever it takes” in order to have inflation converge to 4.5% in 2016, we fully recognize that the risk to our current forecast is that the BCB’s current cycle is both longer and more aggressive that we’ve been anticipating.”
“We do continue to expect that a more contractionary fiscal impulse will be supportive of the BCB’s goals, and that the Copom will leave rates elevated for a prolonged period of time, rather than looking to cut in the face of weak growth or the first inflation print that suggests an inflection point and the first signs that inflation is on a declining path.”
“For now, we continue to expect a further and final 25bp hike in March, but are open to adjusting this call if the minutes warrant it.”