🔆 BUYSIDEBRAZIL | WEEKLY REPORT Copom expected to deliver a 25 bp rate cut while reinforcing a data-dependent approach – 31/jul
✅ We expect the Copom to deliver a unanimous 25 bp cut to the Selic rate at its August meeting, bringing the policy rate to 14.00% p.a. Over the past 45 days, the domestic data flow has become more supportive. In addition to the qualitative improvement in inflation, the first activity indicators for the second quarter have pointed to a gradual loss of economic momentum. In our view, this combination of developments reinforces the assessment that monetary policy remains sufficiently restrictive and supports our expectation of a continuation of the easing cycle.
✅ That said, we expect the Central Bank to preserve a cautious tone. Although recent inflation dynamics have evolved more favorably, inflation remains above target and inflation expectations continue to be unanchored, warranting prudence in the conduct of monetary policy. In addition, the external environment remains highly uncertain, particularly regarding developments in the Middle East conflict. Against this backdrop, we expect the statement to reinforce that future policy decisions will remain conditional on incoming data, preserving flexibility amid elevated domestic and external uncertainty.
✅ On the international front, the main highlights of the week were the FOMC meeting and Kevin Warsh’s press conference. The Federal Reserve left interest rates unchanged, reaffirming its commitment to price stability while maintaining a data-dependent approach to future policy decisions. Even so, the meeting drew attention due to the presence of three dissenting votes, highlighting differing views regarding the appropriate timing for any further policy adjustment.
✅ During the press conference, Chairman Kevin Warsh sought to convey the image of a Committee that remains broadly aligned around its core objectives, arguing that the observed disagreements reflect differences in strategy and timing rather than in commitment to restoring price stability. For now, we maintain our baseline scenario of an unchanged policy rate in the United States, as we believe the Fed is likely to keep monetary policy at its current restrictive stance while assessing the evolution of inflation, economic activity, and risks to the global outlook.
