Brazilian interest rate and exchange rate expectations for 2019 have hit new lows, according to a central bank survey of economists; further evidence that continued policy easing from the central bank is on the cards.
The average forecasts in the central bank’s latest weekly ‘FOCUS’ survey of economists showed for the first time that the dollar is expected to end this year at 4.00 reais and the benchmark Selic interest rate will fall below 5.00% to 4.75%.
Earlier this month, the bank’s policy-making committee, known as Copom, reduced the Selic rate by 50 basis points to a record low of 5.50%, and gave a clear signal that it is prepared to cut again assuming inflation remains well contained.
In its Quarterly Inflation Report last week, the central bank said that based on the market’s consensus exchange rate and interest rate forecasts, inflation will be well below target next year at 3.80%.
According to an article from reuters.com, the dollar is trading comfortably above 4.00 reais at 4.16 , within sight of its record high 4.25 reais, while market-based interest rates imply around 75 basis points of additional easing by the middle of next year.
