19 Feb 2015
Less hawkish on Brazilian rates – BAML
FXStreet (Barcelona) - The BofA-Merrill Lynch Team, provides the 2015 and 2016 forecast for Brazilian growth and interest rates, maintain a less-hawkish stance when compared to what’s being priced in by the markets.
Key Quotes
“Future interest rates are pricing almost 100bp of rate hikes at the March and April monetary policy meetings and a cumulative 135bp by the end of the year.”
“An easing cycle is not expected to start before 2Q16.”
“In contrast, economist David Beker forecasts one last 25bp rate hike in March, flat rates until September and an easing cycle of 100bp from October 2015 to December 2016. Risks are biased toward more rate hikes in 1H15.”
“Our less hawkish forecast is based on weak activity, tighter fiscal policy and relative price adjustments. We forecast the economy contracts 0.5% in 2015 and the government achieves a 1.3% primary fiscal surplus. This should require fewer interest rate hikes than currently priced by the market.”
“We expect inflation to rise to 7.5% this year, well above the target range, but this will be mostly the result of tax hikes, adjustments to administered prices and currency depreciation. Regulated prices are already rising 7.6% YoY, up from 2% a year earlier.”
Key Quotes
“Future interest rates are pricing almost 100bp of rate hikes at the March and April monetary policy meetings and a cumulative 135bp by the end of the year.”
“An easing cycle is not expected to start before 2Q16.”
“In contrast, economist David Beker forecasts one last 25bp rate hike in March, flat rates until September and an easing cycle of 100bp from October 2015 to December 2016. Risks are biased toward more rate hikes in 1H15.”
“Our less hawkish forecast is based on weak activity, tighter fiscal policy and relative price adjustments. We forecast the economy contracts 0.5% in 2015 and the government achieves a 1.3% primary fiscal surplus. This should require fewer interest rate hikes than currently priced by the market.”
“We expect inflation to rise to 7.5% this year, well above the target range, but this will be mostly the result of tax hikes, adjustments to administered prices and currency depreciation. Regulated prices are already rising 7.6% YoY, up from 2% a year earlier.”