Pantheon Macroeconomics

Best viewed on a device with a bigger screen...

8th Feb 2023 10:42Question of the week

As widely expected, Brazil’s central bank policy board—COPOM—last week kept the Selic rate at 13.75%, for a fourth straight meeting. The statement maintains the Bank’s cautious approach, striking a dovish tone on growth but noting that inflation is “above the range compatible with meeting the inflation target”, despite the recent downtrend; the Bank raised its inflation forecasts. The statement says that risks to the Bank’s base case inflation forecast remain balanced, as usual. The upside risks are greater persistence of global inflationary pressures, heightened uncertainty about fiscal policy, and a smaller-than-expected output gap, “especially in the labour market”. The downside risks are further declines in commodity prices, a sharper[1]than-expected global economic slowdown, and the continuation of indirect tax cuts, which currently are assumed to reverse this year. 

We think the Bank will keep interest rates on hold in H1. Increased fiscal uncertainty and unwelcome political noise are pushing inflation expectations higher, but the growth data are already making a compelling case for policymakers to ease. We think they will be able to start cutting rates in H2, as the government is likely to act sensibly on the fiscal front, but risks abound.

Andres Abadia, Chief LatAm Economist

Brazil central bank COPOM labour market tax cuts h1

Free Trial

Recent Webinars:

U.S. Webinar April 2023: Recession Incoming...The Labour Market Is Set To Weaken

Chief U.S. Economist Ian Shepherdson

Eurozone Webinar March 2023: The ECB Is Still Focused On Rising Core Inflation; Is It Making A Policy Error?

Chief Eurozone Economist Claus Vistesen

Consistently Right
Access Key Enabled Navigation
Keywords for: Chart of the Week 8th Feb 2023

independent macro research, Pantheon Macro, Pantheon Macroeconomics, independent research, ian shepherdson, economic intelligence, central bank, labour market, tax cuts, Brazil, COPOM, h1,