Minutes to provide BCB’s take on BRL and its implications for inflation

The BCB kept the Selic target unchanged at 14.25% at its September Copom meeting. While this was not the baseline assumption, the decision was not surprising in light of the hint given at the July Copom meeting. Although the BCB would like to maintain the Selic at this level and then implement a rate cut some time next year (it is expected it in Q2 16), the pressure on the BRL amid a worsening fiscal situation is raising the upside risk of additional tightening this year. Today's decision is certainly not going to help on the BRL front. 

Moreover, inflation is currently inching closer to double-digit figures, and the medium-term inflation trajectory remains highly uncertain for a number of reasons. The minutes of the Copom meeting should provide further information on the BCB's view on the BRL and its implications for the medium-term inflation outlook. On the other hand, however, deteriorating growth could force the BCB to maintain its pause and may even prompt it to begin easing earlier than expected. However, this possibility still appears remote.