VIEW: Tuesday saw ING "agree that....>

BRAZILIAN REAL: VIEW: Tuesday saw ING "agree that at current levels of more than

5.0, the USD/BRL is probably too high. But the fair value for the pair is, also,

probably no longer < 4.0. Under current circumstances and, specifically, under

the assumption that fiscal policy in Brazil will be tight in the foreseeable

future, the SELIC rate is unlikely to rise anywhere close to historical averages

in the next few years. Deep fiscal tightening is a requirement of the existing

fiscal framework, namely the fiscal spending ceiling, and keeping this framework

in place has become especially pertinent, considering the deep deterioration in

fiscal accounts that will take place this year as a result of Covid-19 relief.

Fiscal policy assumptions may change over time, and that would be a crucial

driver for monetary policy in the coming quarters. For now, our assumption is

that even though Congress is likely to be subject to frequent pressures to

weaken the spending ceiling, those efforts would, ultimately, be rejected. As a

result, our base-case scenario is that monetary policy stimulus is likely to

prevail in the coming years. The eventual rise in the SELIC rate towards levels

closer to "neutral" should happen very gradually, and may not start until 2022."