Will Copom break its forward guidance?

Investors are no longer pricing in a 50bp interest rate cut at the Brazilian central bank meeting next month, despite the forward guidance at the March meeting signalling such a move. While we think it’s too early to throw in the towel on a 50bp cut, a look back at the central bank’s recent history suggests that it wouldn’t take much more pressure on asset prices to shift the odds. Either way, the risks to our end-2024 Selic rate forecast (9.50%), which has long been on the hawkish side, now lie to the upside.