The BCB today is expected by the overwhelming majority of consensus to cut rates again by 25bps, suggests the analysis team at Rabobank.
“We hold to our call of no shift in policy as we don’t believe that the last single inflation print is enough to signal a material shift in either the BCB’s baseline scenario or balance of risks. Furthermore, the BCB risks sending a message to the market of an overly dovish stance, after signaling at the last meeting a halt to the easing process. Rising market volatility and threats to global trade diminish the economic risk/reward of further easing, particularly absent any chance for further (needed) substantial fiscal reform. BRL stability could become increasingly threatened, and necessitate interest rate support from the BCB.”
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