Brazilian Real: Cautious BCB easing offers limited support – Societe Generale
Societe Generale’s Dev Ashish notes that the central bank of the Brazil, Banco Central do Brasil (BCB) cut the Selic rate by 25bp to 14.0% as expected, extending a 100bp easing cycle since March.
The Central Bank of Brazil (BCB) reduced its Selic rate by 25 basis points to 14.0% as anticipated during the August Copom meeting. This extension of the easing cycle, now spanning 100 basis points since March, follows a unanimous decision by the board. Societe Generale's Dev Ashish expects one more 25bp cut to 13.75% later this year, contingent on softer near-term inflation and moderating growth.
However, fiscal risks, de-anchored medium-term inflation expectations, ongoing fiscal risks, and elevated structural interest rates pose constraints on further easing. The forecast for end-2027 remains at 11.50% Selic, with risks skewed towards a higher policy rate path.
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