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Barclays: Still See Upside Risks To Their 2021 & 2022 IPCA Forecasts

BRAZIL
  • Along the same lines as market participants, Barclays are expecting a 150bp rate hike, to lift the Selic to 9.25%.
  • The important question is what the Copom will signal in terms of what it will do later on. The BCB has already hiked rates 575bp since March, and not only was GDP lower than expected in 3Q21 (-0.1% q/q vs. 0.0% expected), but 2Q21 GDP was revised downwards, to -0.4% q/q, from -0.1%, reflecting that growth has broadly stagnated after its post-pandemic rebound.
  • Still, inflation continues to increase (IPCA-15 y/y: 10.7% in mid-November), and the BRL has depreciated 15% vis-à-vis the US dollar since June, influenced by adverse fiscal developments.
  • All in all, Barclays still see upside risks to their inflation forecasts for 2021 and 2022 (of 10.0% and 4.6%, respectively) and our terminal Selic rate at 11.25%.
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