Copom to make a monetary policy decision next week

Next week the Copom will make a monetary policy decision, currently the markets are largely pricing in a 25bp hike. Both decisions should be considered by the board given the different movements of economic variables since the release of the latest Inflation Quarterly Report at the end of June, and therefore would not be surprised by a split decision. 

On the one hand, growth data continued to surprise on the downside, specially the retail sales and the monthly GDP proxy, together with the historically high destruction of formal job positions in the past two months. 

"In addition to that, inflation expectations have continuously decreased, especially in the medium term (2017-2019)", says Barclays. 

The BCB Governor Tombini in a recent speech did not use the word "vigilant" when referencing to the posture that the monetary policy should hold, as had been the case during the current tightening cycle. 

The concerns over how far the monetary policy already went in detriment of supporting growth together with the above spurred markets to expect the Copom to slower the pace of tightening.