(Adds analyst comments, interest rate futures pricing)
By Bruno Federowski
SAO PAULO, March 2 Brazil's central bank could
accelerate interest rate cuts depending on inflation
expectations and economic data, minutes from last month's policy
meeting showed on Thursday, keeping views divided on the size of
a widely anticipated cut in April.
The extent of the monetary loosening cycle will also hinge
on estimates of the structural interest rate, the minutes said,
referring to the rate that by itself neither stimulates nor
Following last week's decision, when it cut the benchmark
Selic rate by 75 basis points to 12.25 percent, the
bank said estimates of the structural interest rate depend on
factors including productivity growth, the outlook for fiscal
policy and the business environment.
"The approval and implementation of fiscal reforms, notably
pension reform as well as other reforms and necessary
adjustments to the economy, may lower the structural interest
rate," the bank said in its minutes on Thursday.
A rapid drop in inflation and weaker-than-expected economic
activity data have fueled expectations that the bank could
increase the magnitude of a rate cut in April to 100 basis
points, following 75 bps cuts both in January and February.
Yields on Brazilian rate futures were little
changed on Thursday morning, with traders' bets split between a
rate cut of 75 bps and 100 bps.
Rate future yields were consistent with a total of 300 basis
points of further cuts, bringing the Selic rate to 9.25 percent
by the end of the year, traders said.
The bank said members of its monetary policy-setting
committee, known as the Copom, preferred to keep options open
for their April 11-12 meeting. It said a decision to speed up
rate cuts must not threaten to drive inflation expectations away
from the bank's annual 4.5 percent target.
"At this juncture we expect another 75bp rate cut at the
April meeting, with the probability of a larger 100bp rate cut
continuing to rise given further improvement in inflation
expectations and a continually deteriorating labor market,"
Goldman Sachs economist Alberto Ramos wrote in a note to
A central bank survey of economists put the median forecast
for the official inflation rate this year at 4.36 percent, below
the mid-point of the target band. The survey predicted inflation
would accelerate in 2018 to 4.50 percent.
(Editing by W Simon and Bernadette Baum)