Copom minutes to show BCB’s assessment of medium term inflation risk
The BCB's decision to leave rate unchanged was widely expected, including by us. The bank added a sentence to its short statement ("The Copom emphasizes that monetary policy will remain vigilant to achieve this goal") th…
The BCB's decision to leave rate unchanged was widely expected, including by us. The bank added a sentence to its short statement ("The Copom emphasizes that monetary policy will remain vigilant to achieve this goal") that may arguably be termed as an attempt to remain hawkish about a decision that is otherwise dovish in nature given the state of the inflation outlook and financial conditions.
As argued in a recent piece, the BRL (and therefore fiscal numbers) holds the key to any near-term change in the BCB's position of keeping the rate unchanged. In the case of neither severe pressure on BRL nor further risk to the medium-term inflation outlook, the growth situation will guide the BCB decision during this downturn.
"The BCB is expected to keep the rate unchanged through H1 16 followed by a 50bp rate cut in H2 16. The minutes of the meeting should provide further clarity about the BCB's assessment of the inflation risk at this stage", says Societe Generale.
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