Thoughts on Brazilian Rate Cut Probability by Q3 End
Been watching the Brazilian Selic rate closely. With inflation data showing some moderation and the BCB maintaining a pretty hawkish stance for a while, there's definitely a window opening up. I'd put the odds of a 25-50 bps cut by the end of Q3 at around 65-70%.
The main reasoning is that the external environment, while still uncertain, isn't applying as much immediate pressure, and domestic activity could use a shot in the arm. The BCB is usually quite data-dependent, so if we see a few more consistent prints on the inflation front, I think they'll pull the trigger. A more aggressive cut (75+ bps) seems less likely unless there's a significant shift in the global outlook or a pronounced economic slowdown locally, which isn't my base case right now.
That's a really interesting take. I'm still trying to get a handle on how much the domestic political situation plays into the BCB's decisions, especially with the recent fiscal concerns. Do you think that factors into your 65-70% estimate at all, or is it more purely economic data driving it?