Citibank: Central Bank of Brazil expected to reinforce hawkish rhetoric

Citi analysts wrote that the Central Bank of Brazil may cut interest rates today while strengthening its hawkish policy guidance. It is expected that the Central Bank of Brazil will lower the Selic rate from 14.5% to 14.25%, but sticky inflation may pose an obstacle. Citi expects the bank to stop cutting interest rates in September, when the Selic rate will reach 13.75%. In the context of inflation above the 3% target, Citi stated: “We expect the monetary authorities to upgrade the hawkish tone in their communications.” Citi's analysts anticipate that the Central Bank of Brazil will adopt more data-dependent strategies. The Brazilian real appreciated 0.5% against the US dollar.