Will Brazil extend record-long key rate pause this week?
The market is expecting Brazil's monetary policy committee (Copom) to hold the country's benchmark interest rate, known as the Selic, for the ninth consecutive time.
The Copom is having its monetary policy meeting on Tuesday and Wednesday.
The rate has been at 14.25% since July of last year. It is the longest period of stability for the Selic since inflation targets were introduced in 1999.
"The [central] bank's new board has been consistent in stating that there is no room for loosening monetary policy and Nomura believes that major shifts in such signaling are unlikely in this week's post-meeting communiqué," Latin American strategist at Nomura João Pedro Ribeiro said in a research note. "Rather, Nomura believes that the September Inflation Report could be a more appropriate occasion for the BCB to adopt a softer tone."
"In this sense, while Nomura continues to expect a significant cutting cycle to begin in the near future (and believe there is room for the BCB's inflation forecasts to fall), the timing of an initial cut is still quite uncertain and risks to our call for an October start (50bp) are clearly tilted toward delays," he continued.
LOWER YEAR-END RATE
Analysts consulted in this week's central bank forecast survey continue to expect that the Selic will end this year at 13.75%.
Those surveyed by Reuters expect the rate to drop 0.25 percentage points in October and 0.50pp in November, reaching 13.50% by year-end.
This year's inflation target is 4.5% with a target range of 2.5-6.5%.
However, inflation has for a long time been well above the upper limit of the ceiling. The 12-month inflation rate was 8.74% in July, according to the latest data.
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