InfoMoney: 06/07/2023
A new positive surprise with the IPCE leaves room for the Central Bank to start cutting rates in August, analysts say
Moderate food inflation and the slowdown in core and services prices might allow less restrictive policy in 2H
The IPCA data for May, with inflation at 0.23% in the monthly reading, coming even below the market’s lowest forecasts, not only confirms the trend of disinflation but also points to a scenario of declining expectations. This provides the Central Bank with arguments to prepare for a beginning of interest rate cuts starting in August, according to analysts. The 12-month inflation rate below 4% (3.94%) may also contribute positively in terms of inertia in the months ahead.
Andrea Damico, partner and chief economist of Armor Capital, stated that fortunately, the benign inflation scenario is materializing, which is essential for the expectation of interest rate cuts to begin in August. “Another element is that it will likely generate new declines in expectations for 2023 and, through the inertia channel, for 2024,” she predicted.
Armor revised its IPCA projection for 2023 from 5.50% to 5.10%. For 2024, the revision was from an inflation rate of 3.9% to 3.8%.
