Bank of America expects new Selic cut of 25bps in June

May 10, 2024 12:02 AM AEST | By Investing

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Bank of America expects new Selic cut of 25bps in June

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Investing.com - After the decision of the Monetary Policy Committee (Copom) of the Central Bank to cut Brazil's basic interest rate (Selic) by 0.25 percentage points, as expected, but in a divided decision, Bank of America (NYSE:BAC) (BofA) indicated it expects a further decrease of the same magnitude in June, followed by a pause until January 2025. In a note released to clients and the market on Thursday, May 9th, the bank projected Selic at 10.25% by the end of 2024 and 9.0% by the end of 2025.

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“Although the 5 x 4 split vote was not expected by us, the statement brought several hawkish elements,” highlights BofA, mentioning remarks from the statement citing volatility in the external scenario, which would require caution from emerging countries.

Furthermore, Copom would have reinforced the dependence on data, in BofA's opinion. “Despite the continuity of the disinflationary trend, the underlying measures behavior is a concern. Board members also reinforced the importance of fiscal responsibility to anchor inflation expectations,” economists David Beker and Natacha Perez add.

The minutes are expected to bring more clarity on the divisions observed in the decision, the bank concludes, assessing that it makes sense to wait for deterioration in inflation expectations for next year and a resumption of easing after having certainty about some stance from the US Federal Reserve.

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This article first appeared in Investing.com

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