BCB: BCB Raises Rate To 15.00%, Rates To Stay Elevated
Jun-18 21:48
The Brazil central bank raised the Selic rate to 15.00%. The market, sell-side consensus, had been for a steady 14.75% policy rate outcome (which was also our on bias). It was a close call though, as we noted in our BCB preview: "with economic activity appearing resilient and the labour market still tight, the Copom may opt to hike rates by a further 25bp, as the committee continues to stubbornly pursue the convergence of inflation to target."
- The BCB noted in its statement: "Copom decided to increase the Selic rate by 0.25 pp to 15.00% pa, and judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and promoting full employment.
- If the expected scenario materializes, the Committee foresees an interruption of the rate hiking cycle to examine its yet-to-be-seen cumulative impacts, and then evaluate whether the current interest rate level, assuming it stable for a very prolonged period, will be enough to ensure the convergence of inflation to the target. The Committee emphasizes that it will remain vigilant, that future monetary policy steps can be adjusted and that it will not hesitate to proceed with the rate hiking cycle if appropriate." See the full statement here.
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AUSSIE 3-YEAR TECHS: (M5) Bear Threat Remains Present
May-19 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.370 @ 16:28 BST May 19
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures maintain a softer tone having faded off contract highs, and price remains below the 50-dma. The recent rally took out resistance at 96.730, the Sep 17 ‘24 high, however momentum faltered, leaving 96.860 resistance intact. A continuation lower would strengthen a bearish theme. This would refocus attention on 95.760, the 14 Nov ‘24 low. A reversal higher would refocus attention on 96.860, the Apr 7 high.
ASIA: Coming Up In Asia Pac Markets On Tuesday
May-19 21:09
| 0200BST | 0900HKT | 1100AEST | China Loan Prime Rates |
| 0335BST | 1035HKT | 1235AEST | New Zealand Bill Sale |
| 0400BST | 1100HKT | 1300AEST | South Korea Q1 Household Credit |
| 0435BST | 1135HKT | 1335AEST | Japan 20yr Bond Sale |
| 0530BST | 1230HKT | 1430AEST | RBA Cash Rate |
| 0600BST | 1300HKT | 1500AEST | Tokyo Apr Condominiums For Sale |
CANADA: April CPI Preview: Analysts Eye Potential Core Metrics Uptick (3/3)
May-19 20:57
- National Bank: "The abolition of the carbon tax could have had a disproportionate impact during the month, resulting in a significant drop in gasoline prices. As a result, headline inflation may have declined by 0.2% on a non-seasonally adjusted monthly basis. If our forecast is correct, the annual inflation rate could fall to just 1.6%, which would be its lowest level in seven months. The Bank of Canada's preferred core measures could have been less encouraging, with CPI-trim likely rising from 2.8% to 2.9% and CPI-med remaining unchanged at 2.9%."
- Scotiabank: "April is normally a seasonal up-month for prices and the seasonal adjustment factor compensates for this...The key driver is the elimination of the consumer portion of the carbon tax on April 1st. Earlier guesswork in terms of the impact on gasoline prices has been removed because we now know how gas prices evolved. Lower gasoline prices should shave about 0.3 ppts off m/m NSA CPI. Another -0.1 is roughly estimated to be the impact of the removal of the carbon tax on home heating fuels. Retaliatory tariffs on imports also kicked in during April but are much more modest than ones the US imposed upon itself and directly on Canada... there may be no clear effect [on the BoC's preferred core inflation gauges] when carbon taxes are cut...My hunch is that TM and WM will spike higher this time, thus returning the oscillating pattern of ups and downs back toward a strong rise. I would hope, however, that the BoC will be patient as it evaluates muddied evidence on inflation in the wake of direct and indirect effects of GST/HST cuts and hikes and the removal of the carbon tax."
- TD: "We look for headline inflation to slow 0.6pp to 1.7% y/y in April, reflecting a large one-time impact from eliminating the consumer carbon tax on April 1st. Lower
energy prices will provide the key driver behind a 0.1% decline in total CPI, masking a stronger performance on an ex-energy basis, as the Bank's preferred
measures of core inflation edge higher by 0.1pp to 2.95% y/y. Core goods and food prices will help offset the drag from removing carbon taxes, reflecting the lagged impact of a softer loonie amid recent acceleration in factory/import prices. We do not expect material impacts from countertariffs imposed in March, while shelter prices should see further deceleration. A 1.7% print for April CPI would leave headline inflation tracking slightly above BoC projections from the April MPR, but that alone is unlikely to deter the Bank from further easing. The BoC still wants to see more evidence of tariffs hitting growth, which leaves a spotlight on Q1 National Accounts, while recent labour market headwinds should also lower the bar for the Bank to step back off the sidelines."
