Copom reduced the Selic rate to 12.25% indicating global concerns
Copom reduced the Selic rate by 50 bps to 12.25%, as broadly expected, emphasizing the worsening external environment. The Committee also indicated the continuation of 50 bps in the upcoming meetings without substantial changes to the fiscal comments. We believe the Committee did not want to commit to a change that has not yet occurred and that further details about the fiscal outlook may eventually be included in the minutes. We believe the primary target maintenance is important to fiscal credibility, implying effort for extra revenue and, in case of non-achievement, some expenditure adjustment as indicated by the fiscal framework law approved last August. Finally, the FOMC meeting and most recent payroll results reinforce our expectations of no additional Fed Funds hike this cycle, recently benefiting global markets due to lower yields and a weaker dollar.
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