MNI BCB Preview - May 2025: Tightening Cycle Nearing End

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Executive Summary:

• The Copom is expected to deliver a smaller 50bp Selic rate hike on Wednesday to 14.75%, consistent with the guidance for a slowdown in the tightening pace from prior 100bp increments.
• Governor Galipolo recently said the board is responding to an inflation dynamic that is challenging, and that the current tightening bias in place remains valid.
• However, given an uncertain external outlook that demands caution and a well-behaved BRL, a below-consensus 25bp hike should not be ruled out. Furthermore, any signals on whether the BCB is nearing the end of the tightening cycle will be eagerly awaited.