WEEKLY REPORT Copom Expected to Begin Monetary Easing Cycle Next Week – 03/13
✅ The external environment has become more challenging with the escalation of the war in Iran, which has increased market volatility and pushed oil prices higher, reflecting a rise in the geopolitical risk premium and the risk of supply disruptions, particularly given the uncertainties surrounding the Strait of Hormuz. At the same time, inflation in the United States has come under renewed pressure, with core PCE starting 2026 above target and suggesting that the disinflation process remains gradual and subject to fluctuations. Together with the slowdown in activity evidenced by the downward revision of GDP for the fourth quarter of 2025, this backdrop reinforces the Federal Reserve’s cautious stance, as it is likely to wait for clearer signs before any monetary easing.
✅ In Brazil, recent inflation and activity data have not materially changed the forward-looking outlook. February’s IPCA came in above expectations with a less benign composition, but without compromising the structural assessment of disinflation. Despite positive surprises in retail and services, the overall set of indicators remains consistent with a gradual economic slowdown at the start of 2026. Amid the more uncertain external environment, the relatively stable behavior of the exchange rate has been a key factor supporting our expectation that Copom will begin the easing cycle with a 50 basis point cut, possibly accompanied by cautious and strongly data-dependent communication.
