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Itaú Revise CPI Estimates Lower In Latest Macro Scenario

BRAZIL
  • Itaú expect another 50bp cut from the BCB next week while reiterating, for now, that there is unanimity on the committee to maintain this pace of easing and conveying that there is no room for considering a faster pace, in the short term. However, a more benign services inflation dynamics and the expected economic activity deceleration should allow deeper cuts at the turn of the year (i.e, December), as well as a bigger easing cycle. Itaú now expect the Selic rate to reach 11.50% p.a. by the end of 2023 and 9.00% by the end of 2024.
  • Itaú have noted their revised inflation forecasts to 4.9% for 2023 (from 5.1%) and to 4.1% (from 4.3%) for 2024, in the release of their latest Macro Scenario for Brazil. They highlight that so far this year, the disinflation process has been driven by tradable items (in the wake of inventory normalization and falling commodity prices in local currency). However, the latest readings have also shown greater price easing in non-tradable items (services).
  • Additionally, Itaú confirmed revisions to their GDP estimates to 2.9% from 2.5% for 2023 and to 1.8% from 1.5% for 2024. They note that household spending will likely continue to drive economic expansion in the context of a resilient job market. Their call for the unemployment rate remains at 8% for both 2023 & 2024, with the exchange-rate forecasts remaining at 5.00 reais per dollar for 2023 and 5.25 for 2024.
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