BRL: Aggressive easing and currency risks – Commerzbank

Commerzbank’s Michael Pfister expects the Brazilian central bank to start its cutting cycle, with consensus looking for an initial move after a long hold at 15%. He sees scope for a 25 or 50 basis point cut and anticipates the pace to accelerate later in 2026. Commerzbank remains cautious on Brazilian Real strength given likely larger cumulative easing.

Brazil starts rate-cut cycle

"The Brazilian central bank will likely deliver the most exciting interest rate decision this evening. The consensus is quite clear that the rate cuts could finally begin now (only one vote was cast for unchanged rates)."

"However, with a key interest rate of 15% and a very active central bank, it is also quite possible that a 50-basis-point cut could be delivered right at the start."

"It is not that relevant whether it will be 50 or 25 basis points today though (the latter possibly due to the oil price shock, even though Brazil appears relatively well-insulated)."

"The scope for rate cuts is now there, and the pace is likely to increase to at least 50 basis points per cut over the course of the year anyway."

"We maintain our view that more rather than fewer rate cuts are likely, and therefore remain cautious regarding the strength of the BRL this year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)