{"id":98006,"date":"2026-03-25T22:18:12","date_gmt":"2026-03-26T01:18:12","guid":{"rendered":"https:\/\/murray.adv.br\/?p=98006"},"modified":"2026-03-25T22:18:12","modified_gmt":"2026-03-26T01:18:12","slug":"copom-urges-caution-while-markets-price-in-more-rate-cuts","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/copom-urges-caution-while-markets-price-in-more-rate-cuts\/","title":{"rendered":"COPOM urges caution while markets price in more rate cuts"},"content":{"rendered":"
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Brazil\u2019s Monetary Policy Committee leaves room to speed up easing, while a pause looks less likely unless war triggers broader market stress<\/em><\/strong><\/h6>\n<\/div>\n<\/div>\n
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The minutes of the Central Bank of Brazil\u2019s latest Monetary Policy Committee, or COPOM, meeting reinforced the market\u2019s view that the country remains in an easing cycle.<\/p>\n<\/div>\n

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By Tuesday (24), the interpretation had gained ground that, even with the war in the Middle East and uncertainty over oil prices, a pause in rate cuts now appears less likely than a possible acceleration in the pace of monetary easing.<\/p>\n<\/div>\n

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The committee sought to sound cautious, saying that its next steps would be determined \u201cover time\u201d amid an uncertain backdrop made even more complex by the war in the Middle East. Even so, it signaled the continuation of a Selic \u201ccalibration\u201d cycle after lowering the base rate last week to 14.75% from 15%.<\/p>\n<\/div>\n

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Among market participants, the minutes largely reinforced the message already delivered in the meeting statement. In the section explaining its decision, the committee said that \u201crecent events\u201d would not prevent the materialization of the guidance it had given in January, when it judged that the start of an interest-rate cutting cycle would be appropriate.<\/p>\n<\/div>\n

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COPOM said it had analyzed \u201cthe options for the pace of the start of the base-rate calibration cycle\u201d and concluded that a 25-basis-point cut was the most appropriate move at this stage. \u201cThe magnitude and duration of the calibration cycle will be determined over time, as new information is incorporated into its analyses,\u201d it said.<\/p>\n<\/div>\n

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In economists\u2019 view, that passage shows an asymmetry in COPOM\u2019s thinking. It would take a worsening of the war, with additional effects on oil prices and the exchange rate, to interrupt the cutting cycle, while any improvement in the external backdrop could allow the pace of cuts to accelerate to 50 basis points with fewer obstacles.<\/p>\n<\/div>\n

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Felipe Sichel, chief economist at Porto Asset, said the minutes brought little new compared with the statement and made clear that COPOM believes rates remain highly restrictive and are having the expected effect on activity.<\/p>\n<\/div>\n

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\u201cThe main discussion was about pace and about confirming that we are, in fact, in a rate-cutting cycle. The bar for interrupting that process is currently very high. Barring a disruption in the exchange rate and oil prices, the next moves remain Selic cuts,\u201d he said.<\/p>\n<\/div>\n

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According to BTG Pactual\u2019s team, led by Tiago Berriel, the minutes reinforced a dovish tone by remaining broadly neutral relative to the Central Bank\u2019s earlier communication.<\/p>\n<\/div>\n

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\u201cThe minutes are consistent with the view that COPOM left the door open both to accelerate and to maintain the 25-basis-point pace ahead, depending on how the geopolitical backdrop evolves. The bar for interrupting the cycle seems high to us. So if the current scenario holds, our call remains for the cycle to continue with a 25-basis-point cut at the next meeting. A reduction in uncertainty with positive effects on energy prices would lead to an acceleration to a 50-basis-point move,\u201d they said.<\/p>\n<\/div>\n

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War clouds outlook<\/strong><\/p>\n<\/div>\n

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For Ita\u00fa Unibanco, the minutes suggest the Central Bank remains confident in its ability to calibrate the degree of monetary restriction.<\/p>\n<\/div>\n

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COPOM said the magnitude and duration of the cycle will depend on incoming information.<\/p>\n<\/div>\n

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In recent weeks, the war involving Israel, Iran, and the United States has added uncertainty and pushed oil prices higher. Brent crude has traded above $100 a barrel.<\/p>\n<\/div>\n

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\u201cThat decision [to cut rates and wait for new information] is consistent with the current scenario, in which the duration and extent of geopolitical conflicts, as well as mixed signals about the pace of economic slowdown and its effects on price levels, make it harder to identify clear trends,\u201d the committee said.<\/p>\n<\/div>\n

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The market was also trying to understand why COPOM projected inflation at 3.3% over its relevant policy horizon, well below what economists had expected.<\/p>\n<\/div>\n

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According to the committee, the oil price is assumed to follow the futures curve for the next six months and then rise 2% a year thereafter. \u201cGiven the observed Brent futures curve, this framework translated into a declining path in the second half of the year, after a sharp increase in the short term,\u201d COPOM said.<\/p>\n<\/div>\n

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\u201cIn practice, that meant an upward revision to short-term inflation, but with a partial reversal over the relevant horizon, helping keep the projection relatively lower for the third quarter of 2027,\u201d BTG Pactual said.<\/p>\n<\/div>\n

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For Ita\u00fa Unibanco\u2019s economics team, led by former Central Bank director Mario Mesquita, the minutes indicate that the authority remains confident in its ability to calibrate the level of monetary restriction despite the global turbulence. \u201cIn fact, the minutes suggest that only the options of a 25-basis-point cut or a 50-basis-point cut were on the table,\u201d the bank\u2019s economists wrote.<\/p>\n<\/div>\n

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According to Ita\u00fa, COPOM also highlighted that the disinflation process has lost momentum in more recent readings, something that was not in the statement, and that a possible reacceleration in activity in the first quarter \u201cwill not imply a major change in its current scenario.\u201d In that sense, the bank said, the minutes are consistent with an acceleration in the pace of Selic cuts in April, to 50 basis points, which would take the rate to 14.25%.<\/p>\n<\/div>\n

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Split signals<\/strong><\/p>\n<\/div>\n

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J.P. Morgan economists led by Cassiana Fernandez share the view that the next meeting could bring a larger cut. For the bank, the minutes signaled further easing, even as they stressed the uncertainty created by the war and played down the recent improvement in activity data. \u201cIt will be important to watch how the Central Bank handles these mixed signals in its estimate of the output gap,\u201d they said.<\/p>\n<\/div>\n

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For J.P. Morgan, the minutes brought little new on inflation. \u201cThe Central Bank referred to the inflation process using past-tense verbs, which probably reflects the expected impact of the conflict, already incorporated into the projections, on the IPCA inflation index. The Central Bank highlighted that inflation expectations had been falling before the conflict, but have risen again since then,\u201d the U.S. bank\u2019s economists said in a report.<\/p>\n

*By\u00a0Gabriel Roca,\u00a0Victor Rezende\u00a0and\u00a0Gabriel Shinohara\u00a0\u2014 S\u00e3o Paulo and Bras\u00edlia<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Brazil\u2019s Monetary Policy Committee leaves room to speed up easing, while a pause looks less likely unless war triggers broader market stress     03\/25\/2026\u00a0 The minutes of the Central Bank of Brazil\u2019s latest Monetary Policy Committee, or COPOM, meeting reinforced the market\u2019s view that the country remains in an easing cycle. 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