BTG Pactual sees Selic at 12.50% at the end of the tightening cycle (Image: Pxhere)
O BTG Pactual revised its projections for the monetary tightening cycle in Brazil, following the release of the Inflation Report (IR) for the third quarter of this year.
Now, the bank predicts increases of 0.50 percentage points (pp) in Selic in the November, December and January meetings and another final movement of 0.25 pp in March 2025. Thus, the tightening that would previously have been 1.50 pp, according to the bank, went to 2 pp — taking the rate to 12 .50% per year.
Analysts assess that, overall, the tone of the Banco Central (BC) remains “hawkish”. “In this IR, both the language and, mainly, the additional details provided by the conditional inflation projections reinforced this view”, they state.
The press conference, after the release, brought some nuances in relation to the municipality's latest perspective, but did not change the message transmitted since the Monetary Policy Committee meeting (Copom) September.
“We will continue to monitor the reaction of financial assets to international events and, mainly, the pace of economic growth and inflation expectations for any potential adjustments to this projection”, say Bruno Balassiano, Bruno Martins and Claudio Ferraz.
Revisions to the Inflation Report
The BC improved its economic growth projection in 2024 to 3.2%, compared to 2.3% estimated in June, according to the IR released on Thursday (26), with a smaller impact than expected from the floods in Rio Grande of the South, but predicting a slowdown in the country in 2025.
The municipality stated that the upward revision for this year's GDP is mainly due to the “high positive surprise” in the second quarter, but considered that it expects a lower pace in the second half of this year and throughout 2025, the year for which the municipality projects a growth of 2.0%.
For inflation, at this month's meeting, the Copom worsened its own projections, seeing inflation of 4.3% in 2024 and 3.7% in 2025, with this Thursday's report pointing to an estimate of 3.3% in 2026.
BTG Pactual analysts assess that, despite the substantial upward revision of this year's growth projection and the reassessment of the output gap to positive territory, the conditional inflation projections in the base scenario, which were already above expectations for the first quarter 2026, revealed still high levels for the following quarter.
“Thus, the September communication shows that the Copom recognized, in the domestic scenario, that economic activity has shown more strength than expected and, in terms of inflation, sees a more challenging process for convergence towards the target, citing asymmetry increase in its balance of risks”, they say.
“We recognize that the Committee preferred, due to uncertainties, not to provide guidance, but insists on its firm commitment to bringing inflation to the target”, they reiterate.