BCB highlights limited space for policy response

The Brazilian central bank’s (BCB’s) statement accompanying last night’s decision to cut the Selic rate by 50bp was surprisingly cautious and suggested that further easing isn’t on the cards. With the effects of the coronavirus on Brazil’s economy likely to become more damaging in the coming weeks, we think a further cut is more likely than not. But this all goes to highlight that Brazilian policymakers have relatively little space for an aggressive economic response.