Archive

Brazil Holding Before the Cut

• Brazil's Copom holds Selic at 15% as expected. It signalled easing in March if inflation moderates, while maintaining a contractionary stance through 2026.
• Deanchored expectations (4.0% 2026, 3.8% 2027) constrain the cutting pace despite headline inflation below 4.5%.
• Fiscal stimulus vs monetary restraint dilemma: a 50bp March cut is likely, but the pace depends on labour market cooling and currency stability.

Chile Holds Steady, Cuts Deferred

• Chile's central bank held the policy rate at 4.5% as the consensus expected, signalling a pause in the easing cycle rather than a shift to tightening.
• With inflation falling toward the 3% target and expectations anchored, the decision preserves scope for future cuts if activity data weaken further.
• Forward guidance points to the March IPoM as the key juncture for potential renewed easing, keeping a gradual rate-cut path in play but highly data-dependent.

UK Politics: The Beginning of the End?

• A post-local election Labour Party leadership challenge remains high, despite Andy Burnham being blocked from standing for parliament in a forthcoming by-election.
• In this event, whoever prevailed would likely still be beholden to the left within the Parliamentary Labour Party, which markets would not welcome.
• However, investors might find some solace in a new leader’s likely willingness to move more quickly on closer economic and defence ties with Europe.

By Alastair Newton

Hawkish BOJ Outlook Signals Rate Hikes

• BOJ held rates at 0.75% as expected, but a hawkish outlook and upgraded core inflation reinforce expectations of further hikes in 2026.
• An 8–1 vote, with one member preferring a hike to 1%, and persistent wage-driven inflation, suggests structural pressures that argue for a higher terminal rate.
• With labour tightness and rising inflation expectations, markets now price additional hikes, making the timing and pace of BOJ normalisation the key policy focus.