Brazil Easing Cycle Seen Shorter After US CPI, Commodities Rally
- DI curve prices in significant odds of a last rate cut in June
- Rally in commodities is a double-edged sword for Brazil assets
The Central Bank of Brazil headquarters in Brasilia.
Photographer: Andressa Anholete/BloombergThis article is for subscribers only.
Expectations of a more hawkish Federal Reserve and a rally in commodity prices risk putting a premature end to Brazil’s easing cycle, one of the earliest and steepest among major global central banks.
The short-end of the local swap curve was hit by US consumer-price data released Wednesday, with traders now seeing higher odds Brazil stops cutting interest rates in June. Pricing implies a 7 basis-point reduction to the benchmark Selic rate in August, half the 15 basis points seen in the curve just two days ago.