巴黎银行-新兴市场-宏观策略-巴西：货币政策决策——降息、降息、降息-20190731-6页_429kb

Brazil: Monetary Policy Decision Summary

Core Content

The document discusses the recent monetary policy decision by the Brazilian Central Bank (BCB) to cut the Selic rate, Brazil's benchmark interest rate, by 50 basis points (bps) to 6.0%, following a previous cut in October. This decision reflects the BCB's inclination toward a more accommodative stance, with the possibility of further cuts in September and October, potentially bringing the Selic rate down to 5.0% by the end of 2019.

The BCB's policy statement is described as dovish, indicating a willingness to continue the easing cycle. The central bank upgraded its economic outlook to a "possibility of recovery" from "interruption in the recovery" in June, suggesting a more optimistic view of the economy. This is in line with the expectation that mild inflation will allow for additional monetary stimulus.

Key Points and Main Views

• Monetary Policy Move: The BCB cut the Selic rate by 50bps to 6.0%, surprising some analysts who had expected a cut to 6.25%.
• Dovish Tone: The post-meeting statement maintained a dovish stance, leaving the door open for further cuts in the coming months.
• Economic Outlook: The BCB revised its economic activity assessment to a "possibility of recovery," showing a more positive outlook than in June.
• Inflation Projections: Under current assumptions, inflation is projected to be 3.9% by the end of 2020, below the 4.0% target. An alternative scenario with flat rates predicts 3.6% inflation.
• Global Risks: The BCB acknowledges a disinflationary global environment, despite viewing the outlook as "benign" due to changes in monetary policy in advanced economies.
• Reforms Uncertainty: The statement notes that uncertainties around the reforms agenda still prevail, and the easing cycle will depend on the progress of these reforms in Congress.
• Future Outlook: The document projects a 50bps cut in September and October 2019, leading to a Selic rate of 5.00% by year-end. For 2020, a hiking cycle is expected to start in Q4, with the potential for early rate hikes if inflation dynamics change.
• Next Steps: The meeting minutes (to be released on 6 August) will provide further clarity on the BCB's future monetary policy direction.

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Summary of Projections

Conclusion

The BCB's decision to cut the Selic rate reflects a continued monetary easing cycle, driven by mild inflation and economic recovery expectations. The central bank is closely monitoring reforms in Congress and global economic conditions, which will influence future policy decisions. The 50bps cut was more aggressive than expected, signaling a shift in monetary policy stance toward a more accommodative approach.