Itaú BBA - Quarterly Inflation Report: evidences support new rate cuts

Macro Brazil

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Quarterly Inflation Report: evidences support new rate cuts

diciembre 19, 2019

The IR reinforces our belief that the monetary authority will see room to reduce the Selic rate again.


For the version with all charts and tables, please open the attached pdf file
 

 The December 2019 inflation report shows forecasts that are consistent, in our view, with additional rate cuts in the next Copom meetings. In addition to that, the document indicates that the Selic rate may remain near its minimum level for a considerable time, rising only from 2021 onward. GDP growth has been revised to 1.2% for 2019 and 2.2% for 2020, in line with our forecasts. Among the studies presented, we highlight those that analyze the labor market and show that: (1) the informal sector has been a key driver for the labor market recovery and (2) unemployment rate indicators adjusted by working hours show a slower reduction in the level of slack than otherwise indicated by the traditional unemployment rate.

 Also important, we believe that the path of quarterly inflation forecasts indicates that the BCB may be surprised by a result that will be about 40 bps lower in the first quarter of 2020 – which reinforces our belief that the monetary authority will see more room to reduce the Selic rate again.


For the version with all charts and tables, please open the attached pdf file



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