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BRAZIL: Itaú Join in Forecasting BCB Hike Next Week

BRAZIL
  • Itaú have joined the plethora of analysts in calling for a BCB hike next week and now expect a tightening cycle of 150 bps, in a context of still-pressured exchange rate, unanchored inflation expectations and a revision (albeit small) of the output gap.
  • Itaú see the Selic rate at 11.75% by year-end 2024, with an additional hike in January, to a terminal level of 12.00%.
  • They believe a contractionary interest rate throughout 1H25 is likely to cause a slowdown in economic activity, in addition to some appreciation of the BRL, allowing interest rate cuts to start in 2H25. Itaú see the Selic rate at 11.00% by year-end 2025.

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