TSX runs higher on rate cut expectations
Investing.com -- Brazil’s central bank is expected to keep its benchmark Selic interest rate unchanged at 14.75% in an upcoming unanimous decision, according to Bank of America. The monetary policy in Brazil remains contractionary, with the 12-month ex-ante real interest rate close to 9.5%, significantly above the 5.0% level that the Central Bank considers neutral.
The Monetary Policy Committee (Copom) may update its assessment of the global economic slowdown in its next announcement. Inflation expectations for 2025 and 2026 have remained almost unchanged since the previous meeting, while the Brazilian real has appreciated slightly, gaining about R$0.10 against the U.S. dollar.
Bank of America analysts believe the current hiking cycle has concluded, though they acknowledge risks of one additional 25 basis point increase. The slight appreciation of the Brazilian currency could lead to a minor downward revision in the central bank’s inflation model, although model results carry less weight at the end of a rate cycle.
The Copom is not expected to make any firm commitments regarding future decisions, maintaining a data-dependent approach to monetary policy. This stance gives the committee flexibility to respond to changing economic conditions.
Bank of America maintains its forecast that the Selic rate will remain stable at 14.75% in the near term, with an easing cycle projected to begin in December.
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