Macroeconomic Forecast Brazil

There remains little doubt that Brazil's economy is on a steep ascent following an impressive recovery in recent quarters. Though we see few significant inflationary pressures building on the horizon, we believe that the central bank will soon begin to tighten monetary conditions. We had previously expected the first interest rate hike to occur in H210, but now see scope for an earlier tightening cycle in light of the additional fiscal stimulus efforts in the pipeline. Indeed, the central bank has expressed discomfort with ongoing tax incentives at a time when the output gap is narrowing. We are projecting a total of 250 basis point hikes this year.

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