BCB on hold until Bolsonaro’s reform plans take shape

The Brazilian Central Bank’s (BCB’s) statement from last night’s meeting hints that Copom is waiting to see if president-elect Jair Bolsonaro can deliver on his reform promise when he takes office at the start of 2019. We now expect the Selic rate to stay at 6.50% until year-end (previously 7.0%), although we’re sticking with our long-held forecast for it to rise to 8.5% by end-2019. The markets had, until a few weeks ago, expected the Selic rate to breach 10% next year, but have moved closer to our view.