Brazil: Copom minutes - When (risk) asymmetry reinforces neutrality - Rabobank

"We believe the BCB took the opportunity of the Copom minutes to recalibrate a bit the tone of last week’s communiqué, which came out softer than expected," note Rabobank analysts.

Key quotes

"Amid a still-preliminary discussion about possible rate cuts ahead and even lower levels of neutral rate, we believe the BCB sought to emphasize its neutrality about upcoming policy decisions, referring to still asymmetric (i.e. upwardly skewed) balance of risks for inflation and highlighting a cautious approach as a policy principle. With no pre-announcement of (planned) future decisions, the Copom once again reinforces the data-dependency (read flexibility) for future moves."

"We stick to the view that the outlook for monetary policy (and broad economic conditions) will highly depend on signals and actions by the new government on the realm of reforms."

"If financial markets continues to perceive good chances that the Bolsonaro administration will be able to pass the necessary fiscal reforms in adequate magnitude and scope, and if those projections actually materialize, tame inflation expectations, wide economic slacks and supported asset prices would keep inflation on track (with a falling CPI target). That would be consistent with our long-held baseline call of Selic rate on hold (at 6.50%) all across 2019."