We expect the Central Bank of Brazil to shift its bias towards looser policy over the coming months, but both the timing and the size of any cuts in interest rates will be determined by what happens to the real. If the currency maintains its recent strength then rate cuts could come as soon as June’s COPOM meeting. However, if the political crisis begins to weigh on the real, as we fear, then cuts could be pushed back to later in Q3 or even the start of Q4.
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