MercoPress. South Atlantic News Agency

Brazil, expectations of new lows for inflation and interest rates

The central bank is already expected to lower its benchmark Selic interest rate on Wednesday by 50 basis points for the third straight meeting, to 5.00%

Brazilian inflation and interest rate expectations for next year have fallen to new lows, according to a central bank survey of economists published on Monday, strengthening the view that monetary policy will be loosened further in the months ahead.

The central bank is already expected to lower its benchmark Selic interest rate on Wednesday by 50 basis points for the third straight meeting, to 5.00%, and economists now reckon that will be cut to 4.50% by the end of next year.

That is according to the average forecast in the central bank’s latest weekly ‘FOCUS’ survey of around 100 economists published on Monday.

The weekly FOCUS survey also showed annual inflation will end next year at 3.60%.

That marks the fifth consecutive weekly fall in expectations, and would see inflation fall further below the central bank’s official 2020 target of 4.00%.

Annual inflation is currently running at 2.89%, according to the latest official figures, well below the central bank’s 2019 target of 4.25%, which policymakers say provides the space to continue cutting interest rates.

The latest FOCUS survey showed further stabilization in the near-term exchange rate outlook. For the fourth week in a row, the average end-2019 forecast for the real was 4.00 per dollar BRBY, roughly where it is trading early on Monday.