USD/BRL: BCB cut will not affect the Brazilian real – TDS

Economists at TD Securities see very little arguments to keep the BCB from easing another 50bps at the May meeting. USD/BRL is trading at 5.5803.

Key quotes

“We expect the BCB to cut rates by 50bps at the May meeting, citing further demand deterioration due to the Covid-19 crisis.”

“We continue to see BRL following a depreciation path, with little impact from the interest rate decision for now.”

“The BCB has decided to focus on growth support, and with the size of the economic shock in play, there is little cost from the potential pass-through risk to inflation from BRL depreciation for now.”