Financial markets have lowered their year-end inflation forecasts again, according to a weekly survey of top-rated investment firms conducted by the Brazilian Central Bank.
The median forecast for the country’s consumer price index fell to 4.84 percent from 4.9 percent a week ago and 4.98 percent a month ago. Expectations continue to approach the upper end of Brazil’s inflation target range of 1.75 to 4.75 percent.
Markets have kept their year-end expectations for benchmark interest rates at 12 percent (the policy rate is currently at 13.75 percent). The Central Bank will make a decision on Brazil’s interest rates on Wednesday, with near-unanimous expectations for a rollback of tight monetary policy.
A survey of 128 financial institutions by newspaper Valor shows that two-thirds of them expect a slight cut of 0.25 base points. The other third believes in a more aggressive cut of half a percentage point.
Although market players believe in a rate cut, they expect the decision to be split. According to a survey by the investment bank BTG Pactual, 70 percent of market agents believe that the decision will oppose Central Bank directors appointed under the former Jair Bolsonaro administration and two new Lula-appointed directors.
Gabriel Galípolo, the Central Bank’s new monetary policy director, defended a more dovish approach to interest rates during his Senate confirmation hearing.
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