The Interest Rate Cut at the Next COPOM Meeting

BRAZIL ECONOMICS - Report 26 Jun 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

Although the political crisis has generated uncertainty about asset prices, particularly the exchange rate, two strongly disinflationary forces still predominate: the negative GDP gap and the solid anchoring of expectations. In the last Inflation Report, the Central Bank recognized these points and clearly indicated that the monetary easing cycle will continue, but left open the size of the next cut, which can be between 75 and 100 basis points. If the scenario facing the Central Bank as of the next COPOM meeting were the same as today, the most likely decision would be to maintain the pace of lowering the SELIC rate by 100 points.

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