Brazil: BCB to ease - TDS

Sacha Tihanyi, deputy head of emerging markets strategy at TD Securities, suggests that they have revised their BCB rate outlook and now expect two more consecutive 50bps cuts from the BCB, beginning with the meeting this Wednesday.

Key Quotes

“The acceleration of the pension reform process and stronger indication that net saving over the course of 10 years is likely to be on the level of 800bn to 900bn reais improves the risk-reward profile for the BCB to be more proactively easing sooner rather than later, in order to provide much-needed economic support.”

“Dependent on the Fed's forward indications for policy following this week's expected U.S. rate cut, some risk for BRL weakness exists. The Brazil curve has well priced-in further easing, though economists remain split with 50% surveyed by Bloomberg expecting a 25bp cut, 42% expecting a 50bp cut, and the residual seeing no change in policy.”