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(M2) Bearish Threat Remains Present


(M2) Primary Trend Remains Down


(M2) Resistance Remains Intact


USD Weaker; NZD Outperforms

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MNI BCB Preview - Dec 2021

Executive Summary

  • In line with the guidance from the October meeting statement, the Copom will likely raise the Selic rate by a further 150bp this week, to 9.25%.
  • IPCA inflation hovering just below 11%, as well as the continued pressure on 2022 inflation expectations, confirm the need for further aggressive monetary tightening.
  • Calls for an even greater acceleration of monetary tightening have largely been dispelled given the latest dip in GDP figures, combined with the reductions to 2022 growth expectations.

Click to view the full preview: MNI Brazil Central Bank Preview - December 2021.pdf

Relentless Surge In Consumer Prices

  • Mid-month IPCA inflation in Brazil reached 10.73% Y/y slightly above the expected level of 10.69% and well above the prior reading of 10.34%. According to the latest BCB Focus survey, economists forecast inflation to end 2021 at 10.18%, a considerable increase from the projections at the October meeting of just 8.96%.
  • Perhaps more importantly, the same survey now forecasts 2022 year-end inflation to reach 5.02%. Up from 4.4% before the October meeting, this represents the first breach of the upper tolerance band of the 2022 target of 5%. The continuing deterioration of medium-term expectations will remain the primary concern of the committee and should prompt further aggressive monetary policy tightening.

Source: Brazil Central Bank

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