HALISTER1: PREVIEW: 1st BCB Report Under Goldfajn Awaited Amid Cut Bets

PREVIEW: 1st BCB Report Under Goldfajn Awaited Amid Cut Bets

(Bloomberg) -- BCB’s inflation report release, due Tuesday, will offer new governor Ilan Goldfajn his first chance to present his views as the head of the central bank, in the interview after the release.
  • DI markets pricing in ~100bps of rates cuts in 2017; swap rates dropped in the last 2 days following broad global bond yields fall after Brexit vote
  • Market will focus on BCB forecasts for 2017 inflation, Italo Lombardi, senior economist for Latam at Standard Chartered Bank, who expects Selic cuts to start in August, says in a phone interview
  • NOTE: Minutes of previous BCB meeting, when it was still headed by Tombini, showed 2017 CPI reaching 4.5% target in its reference scenario, while CPI remained over goal in the alternative market scenario
    • “This is a very important report. The BCB board has changed, but not its economic models”
    • Last mid-mo. CPI was “pretty good,” Lombardi says
  • “In the BCB’s reference scenario, we expect higher inflation forecasts in the 4Q16 relative to the March Inflation Report, due to greater pressure from food prices. But for the 4Q17, we expect lower inflation forecast, due to the more appreciated exchange rate and lower inflation expectations,” Itau says in a report
  • “The Goldfajn presence in the interview brings some tranquility that the messages are in harmony and in the same direction”, Thais Zara, chief-economist at consultancy firm Rosenberg says in a phone interview
    • Main focus will be on BCB projections and in Goldfajn’s stance on how the monetary policy will work going forward
  • NOTE: Brazil Senate this Tuesday also to consider the names of new BCB directors nominated by Goldfajn, including Reinaldo Le Grazie, former CEO at Bradesco Asset Mgmt
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ilan Goldfajn (Banco Central do Brasil)
Italo Lombardi (Standard Chartered PLC)
Reinaldo Grazie (Bradesco Asset Management Ltd)
Reinaldo Le Grazie (BRAM-Bradesco Asset Management SA DTVM)
Thais Zara (Rosenberg Consultores Associados)

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