In a week marked by monetary policy decisions, FOMC and COPOM meet expectations, although with mixed communications – 03/21
In Brazil, the Central Bank followed the guidance established in the December meeting and signaled a smaller hike in the May meeting. The statement maintained a hawkish tone, reflecting a still challenging scenario due to internal and external uncertainties. Regarding inflation projections, the Central Bank slightly revised its expectation for the IPCA in the third quarter of 2026, lowering it to 3.9% (from 4.0%), which indicates that the projected terminal rate of 15% in the Focus survey is not sufficient to anchor inflation expectations. Thus, we believe this revision reinforces our projection of a terminal interest rate of 15.5% in June, with increases of +75bps and +50bps, respectively.
It is worth noting that next week will be filled with new communications from the Central Bank, with the release of the meeting minutes and the first-quarter Monetary Policy Report, which will be particularly relevant for a deeper analysis of the committee’s view on the current economic situation, as well as the outlook for inflation and economic activity indicators. Thus, for now, we maintain our scenario unchanged.
On the fiscal front, the government introduces an Income Tax Exemption Bill, emphasizing revenue neutrality. According to the economic team, the measure has a neutral fiscal impact, with revenue compensation occurring through taxation of the wealthiest segment of society. However, our estimates suggest that the necessary compensation to ensure this neutrality may be greater than projected by the government. While the institution estimates compensation at R$25 billion, our projections point to a value closer to R$40 billion.
In the United States, the FED revises current-year projections more aggressively, although the committee chairman delivered a more dovish message. In the dot plot, the expectation of two additional 25bps cuts by the end of 2025 signaled the anticipated continuation of monetary policy easing, especially if the disinflation process persists. Given the current volatility and uncertainty, we maintain our expectation of a single Fed Funds rate cut in June, closing 2025 at 4.25%, a scenario contingent on developments related to tariff policies.
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