Next week’s COPOM meeting minutes crucial to determine next steps of Brazil's monetary policy

The stronger BRL, compared with the latest Quarterly Inflation Report, could have had a positive effect on the inflation forecasts according to the BCB's models, which, coupled with the mix of improvement in fiscal policy, relatively stable inflation (in y/y terms), and sequential negative activity data, especially coming from the labor market, should all lead the the BCB stopping the tightening cycle. 

But, on the other hand, the BCB could continue to show some drawback from the fact that inflation expectations are not still anchored, and could argue that there are incipient signs, as of now, that the second-round effects of the relative prices adjustments occurred in Q1 are contained. 

According to Barclays it is a fairly hawkish speech that changes the balance of risks of the BCB and would leave the door open for another hike. As of now, no further hikes are expected in this cycle.