Focus: market bets on interest rate cuts in September – 06/05/2023 – Market

Analysts consulted by the Central Bank strongly raised the outlook for the Brazilian economy this year after stronger-than-expected first-quarter data and saw a sharper first cut in interest rates in September.

According to the Focus survey released by BC this Monday (5), the GDP (Gross Domestic Product) growth estimate in 2023 rose to 1.68%, from 1.26% in the previous week.

The improvement comes after the IBGE disclosed last week that the GDP expanded 1.9% in the first quarter compared to the previous three months, above expectations, thanks to the impulse of the agricultural sector. However, for 2024, the bill is down by 0.02 percentage points to 1.28%.

The weekly survey with a hundred economists also showed that it follows the perspective that the basic Selic interest rate will be maintained at the current level of 13.75% at this month’s Copom (Monetary Policy Committee) meeting and also at the August one.

There were also no changes in the scenario for the end of this year and next, with the Selic projected, respectively, at 12.50% and 10.00%.

Investors continue to see that the first interest rate cut will take place in September, but now see a stronger movement. Now, the estimate is that the Selic will be reduced by 0.5 percentage points at this meeting, against 0.25 points estimated before.

This movement would be followed by another cut of 0.25 points and another of 0.50 points, respectively, in the last two meetings of the year. Before, the experts consulted saw two cuts of 0.5 points in November and December.

The survey, which captures the market’s perception of economic indicators, also pointed out that expectations for the rise in the IPCA remain in a downward trend.

The specialists consulted now see an inflation of 5.69% this year, against 5.71% in the previous survey. For 2024 the account was adjusted downwards by 0.01 point, to 4.12%.

For the following two years, the survey remains unchanged, with an increase in the IPCA calculated at 4.0%.

The center of the official target for inflation in 2023 is 3.25% and for 2024 and 2025 it is 3.00%, always with a tolerance margin of 1.5 percentage points, more or less.