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BCB Survey Sees Further Revisions To Inflation and Selic Rate Forecasts

BRAZIL
  • The latest central bank survey shows not only a forecast revision to the 2021 year-end inflation figure but the upward revision of 2022 estimates further indicates the contamination of medium-term expectations:
    • Brazil economists forecast 8.96% 2021 inflation; prior 8.69%
    • Brazil economists forecast 4.40% 2022 inflation; prior 4.18%
    • Brazil economists see 8.75% 2021 year-end Selic; prior 8.25%
    • Brazil economists see 9.50% 2022 year-end Selic; prior 8.75%
  • The survey results precede a mid-month IPCA inflation release due tomorrow and is just two days before an important Copom meeting/decision.
  • Following the significant volatility in local assets last week, many analysts have revised their calls for the BCB to take more aggressive action at Wednesday's meeting.
  • Furthermore, on Friday, Economy Minister Guedes said the central bank can't fall behind the curve, potentially adding further pressure on Governor Campos Neto and the committee to alter the current flight path of 100bp hikes.
  • The Ibovespa trimmed losses, swap rates fell and USDBRL retraced lower late on Friday, after President Bolsonaro confirmed his trust in the minister. Guedes' additional comments reiterating the solid fiscal fundamentals appeared to provide some relief for local assets with some potential profit-taking also playing a part.
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