Macroeconomic Forecast Brazil

BMI View: The pace of credit growth in Brazil finally slowed in December, dropping slightly to 20.5% year-on-year (y-o-y) from 20.8% y-o-y in November. While the print will come as a welcome relief to the monetary authorities as they seek to curtail the supply of easy credit to the economy, we caution that loan growth will need to drop back further if inflation is to remain within the target range of 2.5-6.5% y-o-y. We expect consumer price inflation to drop to 5.5% y-o-y by end-2011, from 5.9% y-o-y in December.

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