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27 Mar 2015
Brazil: tightening cycle in the limelight – TDS
FXStreet (Edinburgh) - Cristian Maggio, Strategist at TD Securities, reviewed the recent Quarterly Inflation Report released by the BCB.
Key Quotes
“The Q1 Quarterly Inflation Report (QIR) the BCB released yesterday confirmed our expectation about the trajectory of inflation projections”.
“The BCB has sharply revised the 2015 forecast to the upside, but continues to exhibit an optimistic view on 2016 IPCA inflation. This suggests that, while the battle to bring inflation under control in 2015 is already lost, inflation should return within the tolerance range next year and end it much closer to the 4.5% central target than we and the market expect”.
“In conclusion, the BCB seems to suggest that another 50bp hike is in the cards (adding more tightness to their projections of rates at 12.75% until end of next year), but further hikes will not be automatic”.
“So our 13.25% terminal Selic rate forecast seems reasonable, although the BCB may already reduce the pace to 25bp at the April meeting, or add a final 25bp at the June 3 one”.
Key Quotes
“The Q1 Quarterly Inflation Report (QIR) the BCB released yesterday confirmed our expectation about the trajectory of inflation projections”.
“The BCB has sharply revised the 2015 forecast to the upside, but continues to exhibit an optimistic view on 2016 IPCA inflation. This suggests that, while the battle to bring inflation under control in 2015 is already lost, inflation should return within the tolerance range next year and end it much closer to the 4.5% central target than we and the market expect”.
“In conclusion, the BCB seems to suggest that another 50bp hike is in the cards (adding more tightness to their projections of rates at 12.75% until end of next year), but further hikes will not be automatic”.
“So our 13.25% terminal Selic rate forecast seems reasonable, although the BCB may already reduce the pace to 25bp at the April meeting, or add a final 25bp at the June 3 one”.