BCB May Change CPI Approach, But Credibility Is Intact: Analysts
(Bloomberg) -- New BCB governor Ilan Goldfajn signaled potential change in the way the bank will pursue the inflation target through 2018, analysts say.
- Eventual flexibility not seen as more tolerance for price increase
- NOTE: Goldfajn yday said the trajectory that will send inflation toward the midpoint of the target should be at same time “challenging and credible”
- Speech signals that inflation is no longer expected to hit the target in 2017, BCB’s previous goal, Banco Safra economist Carlos Kawall says
- BCB could postpone the goal until middle of 2018
- BCB also could create a “adjusted target” for 2017 of 5.00-5.20%, instead of current 4.5%, Solange Srour, economist at ARX Investimentos, says
- BCB expression “challenging” means that 2017 adjusted target likely to be smaller than the current market forecast of 5.5% for CPI next year
- The new BCB team’s track-record of strong credibility may allow it to change the convergence
- It would be “not credible” to try slowing CPI from more than 7% in 2016 to 4.5% in 2017; it would require BCB to promote a “shock” of rates increase, which would not make sense as local demand is already extremely weak, Srour says
- Potential change in target convergence “does not mean lenience with inflation”: Kawall
- BCB declined to comment to Bloomberg
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Ilan Goldfajn (Banco Central do Brasil)
Carlos Kawall Leal Ferreira (Banco J Safra)
Solange Srour (Arx Investimentos)
To de-activate this alert, click
hereUUID: 7947283