Archive

Oil in 2025

• The threat of trade wars makes forecasting the oil price this year unusually hazardous. However, based on the ‘known knowns’, one can safely assume that the downward pressure we saw through 2024 will persist. My forecast for Brent crude on 31 December is, therefore, USD65 per barrel.

By Alastair Newton

Brazil: 100bp Rate Hike To 12.25% (Consensus 12.00%) in Dec-24

• Brazil's Copom raised the Selic rate by 100bp to 12.25%, exceeding consensus expectations of 75bp due to elevated inflation projections and heightened inflation expectations.
• Stronger-than-expected domestic activity, widening output gaps, fiscal policy pressures, and currency risks necessitate a more aggressive monetary stance, with inflation risks skewed to the upside.
• Copom anticipates further rate hikes of similar magnitude, contingent on inflation trends, economic activity, and external risks, reaffirming its commitment to achieving price stability over the medium term.

Brazil: 50bp Rate Hike To 11.25% (Consensus 11.25%) in Nov-24

• Brazil’s Copom increased the Selic rate by 50bp to 11.25%, maintaining a hawkish stance amid persistent inflation and above-target inflation expectations.
• Upside inflation risks, including resilient economic activity and potential currency depreciation, influenced the decision; fiscal credibility remains critical for lowering risk premia.
• Inflation projections, domestic economic strength, and global disinflationary trends will guide future rate adjustments, sustaining Copom’s commitment to price stability.

Forceful Fed Rhymes From 1998

• The Fed’s 50bp rate cut was remarkably forceful relative to the resilient data. It relies on rates being far above their neutral setting despite no evidence for this tightness.
• Historical parallels to 1998 are mounting with the forceful start and conveniently timed political support. A repeat would mean an early pause and hikes returning in 2025.
• Brazil has tracked a year ahead of the Fed in the last hiking and cutting cycles. Its latest hike would also be consistent with the Fed following the 1998 scenario.

By Philip Rush