BTG points out the need to interrupt interest rate cuts at the next Copom
BTG Pactual assesses that the BC (Central Bank) should interrupt the cycle of Selic rate cuts at the June meeting of the Copom (Monetary Policy Committee), given the deterioration of the inflationary scenario and the increase in risks to prices in the coming months.
The report states that, under a strict reading of the models used by the BC, there would be practically no room for further interest cuts at this time.
"The projections of the Central Bank's replicated model, using Focus interest, should be revised from 3.5% to 3.64%", says BTG.
According to the bank, an interruption prior to the expected monetary easing scenario would help avoid a further de-anchoring of inflation expectations and preserve space for a gradual resumption of cuts in 2027.
Despite this, considering recent communications from the monetary authority, the financial institution maintains a final cut of 0.25 points as a base scenario, taking the basic interest rate from 14.5% to 14.25% per year, followed by stability until the end of 2026.
In a report released this Tuesday (2), the investment bank states that the fundamentals that supported monetary easing have weakened since the last Copom meeting.
According to the analysis, current inflation surprised upwards; economic activity, labor market and credit indicators continue to show resilience; and expectations worsened again, including for longer horizons.
The bank states that the balance of risks for inflation has become more unfavorable and lists as factors "the persistence of the oil shock, risks related to global production chains, strong El Niño and possible end of the 6×1 scale".
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In the assessment of BTG economists, the combination of these shocks makes it difficult to distinguish temporary pressures from more persistent inflation movements, requiring greater caution on the part of the monetary authority.
Recent data reinforces this concern, according to analysts. The Brazilian GDP (Gross Domestic Product) grew 1.1% in the first quarter of 2026, driven by consumption and investments, while the labor market remains heated, with unemployment close to historic lows and wages rising above productivity.
Copom expectations have also worsened since the last meeting. BTG points out that the increase in estimates for 2028 is especially relevant as it reflects a deterioration in a horizon less influenced by current shocks.
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Source: CNN