Brazil Economists See Rates Falling Less Aggressively in 2016David Biller
Brazil economists expect the central bank to cut the benchmark Selic rate less aggressively in 2016 after a series of negative inflation surprises.
Economists forecast the Selic will end the year at 13 percent from its current level of 14.25 percent, according to economists surveyed in the week ending June 10. A week ago, they expected the rate to fall to 12.88 percent and, by mid-May, they saw it dropping to 12.75 percent. They also increased their year-end inflation forecast for the fourth straight week to 7.19 percent, from 7 percent one month ago.
Policy makers decided in an unanimous decision last week to hold interest rates at their highest level since 2006. The market is betting that at their next monetary policy meeting, for the first time presided over by Ilan Goldfajn, directors could begin an easing cycle amid Brazil’s deepest two-year recession on record.
Analysts again raised their GDP outlook for next year, to 1 percent, from 0.85 percent the prior week and 0.5 percent a month earlier. They also revised their 2016 GDP call to a 3.6 percent contraction from 3.71 percent the prior week.
Last week BNP Paribas revised its 2016 GDP forecast to a contraction of 3 percent, versus a prior forecast for a 4 percent decline, and held its 2 percent growth expectation for 2017. Itau Unibanco Holding SA also improved its forecast for 2016 GDP to a 3.5 percent contraction, from 4 percent previously.