BCB’s meeting minutes to show additional view on pace of gradual easing, says Societe Generale

The Brazilian central bank’s Copom minutes are expected to give additional view on the pace of gradual easing of the monetary policy. As widely anticipated, the Brazil Central Bank, during its October meeting, began easing monetary policy. It lowered the key rate by 25 basis points, the first cut in four years. The central bank talked about the risks surrounding its inflation projections such as inflation inertia and the high level of slack in the economy.

However, it continued to judge that “convergence of inflation to the 2017 and 2018 target is compatible with a moderate and gradual easing of monetary conditions”, noted Societe Generale. Moreover, the BCB implied that the size of easing of monetary policy and a possible accelerating of its pace would rely on favorable evolution of factors that permit greater sentiment on reaching the inflation targets at relevant horizon.

With the structural rigidity and its impact on inflation in the country, the gradual easing at the moment suggests another cut of around 200bps throughout 2017, which would take the Selic rate to 12 percent, before easing further in the medium-term, according to Societe Generale.