Brazil: Political turmoil leads to less dovish COPOM – TDS

Sacha Tihanyi, Senior Emerging Markets Strategist at TDS, points out that Copom cuts by 100bps as TDS expected, but signals reform uncertainty as tempering the easing process.

Key Quotes

“The language used to describe the potential to moderate the pace of easing suggests to us that the July meeting will be a 75bp cut.”

“The easing process going forward now appears to be highly dependent on estimates of the structural interest rates.”

“Increases in political uncertainty hampered a more timely reduction of these estimates, and made them more uncertain, perhaps suggesting a higher terminal rate than in the past.”