Halister News

(Bloomberg) -- Well-behaved inflation and Brazil Central Bank’s recent communications indicate that there’s space to reduce Selic rate to 6.5%, Itau says in report signed by chief economist Mario Mesquita.

• CPI estimate for 2018 cut to 3.8% from 4% due to "lower inertia of past inflation, anchored expectations and the remaining effect of the output gap still in negative territory"
  • 2017 CPI estimate cut to 3% from 3.2%
• Bank says that there’s still room for a decline in BCB’s 4.3% inflation estimate for 2018, reinforcing the need for some additional monetary stimulus
  • Selic is expected to reach 6.5% in 2018 with cuts of 75bps in Oct., 50bps in Dec. and a further 50bps in Feb. meeting
• Itau raised 2018 GDP projection to 3% from 2.7%, incorporating an additional Selic cut at the beginning of next year
• Also revised BRL estimate for 2017 from 3.35/USD to 3.25/USD
  • "International scenario puts pressure on emerging currencies at the end of the month", including BRL, but with "less intense depreciation due to the good perspective on the progress of the micro economic reform agenda and its consequences on capital flows"

To contact the translator on this story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net To contact the translation editor responsible for this story: Danielle Chaves at djelmayer@bloomberg.net Reporter on the original story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Marisa Castellani