Societe Generale’s Emerging Markets (EM) strategists say the Brazilian central bank, Banco Central do Brasil (BCB) minutes support an easing cycle with pauses to guide inflation back to 3% by 1Q28, leaving USD/BRL approaching its 200‑day moving average at 5.25.

Central bank signals steer LatAm FX

"In LatAm, minutes from the BCB meeting support our house view that the easing cycle will be interspersed with pauses to guide inflation back to the 3% target by 1Q28. "

"Policymakers signal a preference to track a path closer to market and analyst expectations to limit financial and macro volatility."

"That said, the minutes do not fully explain the decision to drop rates by 25bp last week despite signalling upside inflation risks. "

"The quarterly inflation report tomorrow should provide more clarity on the policy path ahead."

"USD/BRL is closing in on the 200dma at 5.25."

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