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JPMorgan Raises Brazil Growth Forecast, BCB View Unchanged

  • JPMorgan have noted that like many other economies, Brazil has grown more than expected at the beginning of this year. While this can initially be seen as a signal that strong economic growth can make disinflation more costly, in fact last week’s 1Q GDP growth of 8%q/q, saar was mostly driven by a supply shock.
  • This composition of the growth profile does not change their view on BCB strategy. As a matter of fact, the April industrial production contraction suggests that monetary policy’s effects are working through the Brazilian economy, and the backdrop of decreasing demand and high inventories seems to bode well for their call of slowing CPI and monetary easing before year-end.
  • In any case, the strength of agriculture and its spillover to the rest of the economy, on the top of the stability in labor markets recently, has led JPM to revise their 2023 GDP forecast from 1.7% to 2.4%y/y.

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