Brazil Seen Easing 100bp

RBC Capital expects Brazil’s central bank to deliver a 100bp Selic rate cut to 10.25%, in line with market consensus, as the fallout from the global crisis in Brazil continues to deepen. However, it believes the pace of future rate cuts will be more data dependent. RBC predicts one last 50bp Selic rate cut in June to 9.75%. Bank of America-Merrill Lynch also forecasts a 100bp cut today. “We reaffirm our call of one more cut of 100bp, at the June meeting, culminating the easing cycle with the Selic at 9.25%,” the shop says. Morgan Stanley meanwhile believes there is room for a 150bp easing, citing falling inflation, which is set to drop below the central bank’s 4.5% target around mid-year from a peak of 6.4% in October. In June, Morgan Stanley forecasts that the central bank will drop an additional 150bp cut, leaving the Selic at 8.25%.