6 Mar 2015
Outlook for the Brazilian real remains neutral – BAML
FXStreet (Edinburgh) - The perspective for the Brazilian real is considered as neutral in the near term to bullish in a longer horizon, suggested analysts at BAML.
Key Quotes
“We revised our 2014 growth forecast to 0% from a 0.2% increase previously. Our previous assumption for paced recoveries in confidence and activity in 4Q postelections did not materialize”.
“We increased our inflation forecast for 2015 to 7.5% from 7.1% and kept 2016’s unchanged at 5.5%”.
“The BRL depreciation also picked up at the margin and lower rainfall levels should prevent food inflation to decelerate. These effects should compound to keep market-driven inflation more resilient this year, aside from their first degree impacts on the headline”.
“We are neutral the Brazilian real with a bias to be long. The exchange rate is still about 15% overvalued, so we expect currency depreciation to restore domestic and external balance, although less than implied by forwards”.
“Fiscal policy will turn contractionary this year in order to increase the primary fiscal balance. We expect additional interest rate hikes to re-anchor inflation expectations and gradually lower currency intervention”.
Key Quotes
“We revised our 2014 growth forecast to 0% from a 0.2% increase previously. Our previous assumption for paced recoveries in confidence and activity in 4Q postelections did not materialize”.
“We increased our inflation forecast for 2015 to 7.5% from 7.1% and kept 2016’s unchanged at 5.5%”.
“The BRL depreciation also picked up at the margin and lower rainfall levels should prevent food inflation to decelerate. These effects should compound to keep market-driven inflation more resilient this year, aside from their first degree impacts on the headline”.
“We are neutral the Brazilian real with a bias to be long. The exchange rate is still about 15% overvalued, so we expect currency depreciation to restore domestic and external balance, although less than implied by forwards”.
“Fiscal policy will turn contractionary this year in order to increase the primary fiscal balance. We expect additional interest rate hikes to re-anchor inflation expectations and gradually lower currency intervention”.