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SocGen See Copom Delivering 100bp Hikes In Aug and Sep

  • Following the continued rise in inflationary pressure, SG have revised their year-end Selic rate forecast to 6.75% from the 5.50% published in their June quarterly outlook.
  • They now foresee 100bp rate hikes in each of next two Copom meetings followed by a 50bp hike in 4Q21.
  • The medium-term inflation outlook remains largely stable, so the frontloaded tightening this year now leads them to expect no rate hike in 2022 or 2023. The assess the risks to their forecasts are tilted to the upside in the near term and to the downside in the medium term.
  • 2021 growth forecast also raised from 4.7% to 5.2%, mostly due to upward revisions in the April activity data. Given the stronger growth-inflation mix, SG now expect a much lower fiscal deficit (-6.0% of GDP vs -6.9% projected earlier) and lower public debt (82.4% of GDP vs 86.9%) this year.

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