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quinta-feira, abril 26, 2012

Brazil: Copom Minutes - Sliding Doors

· First thoughts: In a preliminary reading of the minutes, two points draw attention: first, the Copom no longer mentions that it expects the Selic to accommodate in a level “slightly above the historical lows”. Second, they explicitly mention that “any further easing must be conducted with parsimony”. Elsewhere, the minutes do not bring any material change in Copom’s views on the international scenario and somewhat downplayed the inflation risks stemming from the economic activity, leading to an overall benign outlook for inflation. Forecasts raised from the previous meeting, and stand around the center of the target in 2012 and above the center of target in 2013 in the reference scenario, likely as a consequence of the weaker BRL. With this combination, the Copom no longer restrains itself to stop the easing cycle at the current 9% pa, at the same time it signals to the market that, while more cuts may be forthcoming, they will be more contained both in magnitude and pace. It seems an effort to limit markets’ bets on a more aggressive easing at this point.

· Bottom line: The minutes do not imply a strong commitment of the Copom with neither a stop not an additional easing, therefore reinforcing that the Central Bank’s decisions will be data-dependent. Markets will likely debate on whether the “parsimony” means slowing the pace of cuts to 50 or 25bps, which may imply in some movement in the short end of the curve. At the same time, today’s minutes may fuel the debate on where the Selic will be at end-year, given that there is no longer a mention to a “floor”. Considering the slower pace, the expectation of low inflation for the next months and the still-binding constraint associated with the savings accounts rules, we expect markets’ bets to stay within the 8 to 8.5% pa range.

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