For whom the bell tolls?
The Copom Minutes from last week's meeting revealed a rather hawkish tone regarding inflation prospects, suggesting that—even in the absence of guidance for meetings beyond May—the monetary tightening cycle is unlikely to end in the next meeting.
We maintain the view expressed in our commentary on the March meeting: that the Copom should raise the Selic rate target by 50 basis points in the next meeting and by 25 basis points in June, concluding the tightening cycle with the Selic at 15% per year. However, the risk of a higher terminal rate now seems greater than it did before the Minutes were released.
The Minutes gave considerable weight to two phenomena: the deterioration of the external scenario, reflected in a significant increase in uncertainty; and the challenges associated with bringing inflation back to target, despite signs of “incipient moderation in growth.”
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