“Business as usual,” say analysts ahead of Brazil’s next monetary policy meeting

The Monetary Policy Committee of Brazil’s Central Bank meets next Tuesday and Wednesday, and the overwhelming view among analysts and investment banks is that they will continue recent trends and cut the country’s benchmark interest rate by half a percentage point.

According to a survey carried out by investment bank BTG Pactual, 95 percent of respondents believe the 0.5 percentage point cuts applied at recent policy meetings will be repeated next week. For the committee’s December meeting, around 98 percent bet on an identical cut. 

Forty-nine percent of the respondents believe Brazil’s benchmark interest rate will end next year between 9.5 and 9.75 percent, while around 25 percent believe in an even bolder decrease by the end of 2024, to between 9 and 9.25 percent.

Last month, the Central Bank cut the policy rate to 12.75 percent and stressed its plans for cuts in the final two meetings of the year, reinforcing “the need to persist on a contractionary monetary policy until the disinflationary process consolidates and inflation expectations anchor around its targets.”

Analysts at brokerage Guide Investimentos agree, noting that while the economic scenario has “deteriorated in some respects” since the last monetary policy meeting, Brazil’s inflation remains on a downward trend, justifying their expectation for a 0.5 percentage point cut.

The country’s IPCA-15 mid-month inflation index for October showed a small 0.21 percent increase, which included a fifth consecutive month of slowing food inflation.

Furthermore, according to the brokerage, the bank’s statement after the meeting “should maintain a cautious tone and foresee another cut of the same magnitude for the last meeting of 2023.”

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