End in sight for Brazilian rate rises
Inflation data and comments from Brazil’s interest rate setting committee Copom point to an end in the country’s tightening cycle
Brazil's central bank is likely to wind back interest rate
hikes at its next meetings, analysts said on Thursday after the
monetary policy committee published the minutes of its most
The committee, Copom, said while the global economy was
picking up, activity in Brazil was moderating. Analysts
interpreted the comments as a signal that the benchmark Selic
rate may rise by 25 basis points at Copom's next meeting in
February - but that could be the last increase for the
"Given [Copom's] extensive explanation on a more benign
reading of the domestic economy, we believe the tightening
cycle is near the end," said economists at Bradesco BBI.
That view was reinforced by lower than expected inflation
data published also on Thursday. Brazil's IPCA data indicated
annual inflation of 5.63% to January, down from 5.85% in
Brazil began a tightening cycle in April 2013, when Copom
raised the Selic rate by 25 basis points. At each of the six
subsequent meetings it has lifted rates by 50 basis points.
The Selic stands at 10.5%.
Analysts at Bank of America Merrill Lynch, Barclays,
Bradesco, Goldman Sachs and Itaú predict the central
bank will slow the pace of rate hikes at its next meeting on
"It is the combination of weaker growth and slowing
inflation that should push the BCB to moderate the pace of
hikes in February," said analysts at Barclays. The investment
bank expects rate-setting committee to hold the Selic at 10.75%
this year, after a 25bp raise at the next meeting.
Economists at Itaú BBA also forecast a 25bp rate hike
in February, saying that subsequent moves will depend on
Goldman Sachs analyst Alberto Ramos noted that Copom has
been emphasizing its uninterrupted rate rises since April and
the fact that those will have a lagging effect on Brazil's
sticky inflation data. "All this, in our assessment, indicates
that although the Copom will extend the tightening cycle, it is
on track to taper the magnitude of rate hikes."