UBS sees pause in Brazil’s interest rate cuts in June

UBS sees an agenda for easing monetary policy in Brazil, according to a report released to clients and the market this Wednesday (May 29, 2024). The team estimates that the Brazilian interest rate, the Selic, will reach 9.75% at the end of this year.

Furthermore, he stated that expectations for inflation for next year have increased significantly in Brazil. Among the reasons, according to the bank, would be the higher-than-expected reading of American inflation in April, leading to revisions in external interest levels.

Currently, the Brazilian interest rate is at 10.5% and the economics team does not expect cuts in the Selic in the next two meetings.

In the last decision, the Copom (Monetary Policy Committee) of the Central Bank cut the Selic by 0.25 percentage points, and did not provide a guidance for the next meeting.

“Brazilian economists believe rate cuts could resume in September under certain conditions,” indicates the report.

MEXICO

The same report said it expected a 0.25 percentage point cut in Mexico’s interest rates in June. The forecast for the Mexican interest rate is a projection of 10%.

The bank claims that “the failure of the Mexican economy to deliver the dynamism witnessed in the first 3 quarters of last year could lead Banxico to reconsider its current monetary stance”said UBS.

He also indicated that the country would be more dependent on the inflation trajectory, especially in the core.

At the last meeting, the Mexican monetary authority chose to pause easing. The bank’s expectation is for a cut of 0.25 percentage points in June and a gradual decrease from the current 11% to 10% by the end of the year.

With information from Investing Brasil.