01/12/2024 – 18:53
Bradesco Asset Management started to project a continuous cycle in the reduction of interest rates in Brazil, instead of a two-stage cycle, taking into account the approach of the first interest rate cut in the United States, now predicted by the house for June and not more November.
The assessment is that the Federal Reserve's move (Fed, the American central bank) should remove a potential restriction on the Selic's trajectory. Thus, the Bradesco manager still foresees a reduction in the Selic to the terminal rate of 8.50%, but with this rate already being reached in November, when, hopefully, the cycle will be closed by the Central Bank (BC).
Previously, the bet was that monetary easing would take place in two stages, with the Selic falling to 9.5% at the end of this year, and retreating, in a second stage, to 8.5% only in 2025, in the wake of the relaxation interest rates in the United States.
The observation is part of a scenario review report in which Bradesco Asset also reviews the growth of Gross Domestic Product (GDP) in 2024: from 1.5% to 1.7%, rising from 2.8% last year .
According to the manager, the process of normalizing inflation, as abroad, was consolidated in Brazil, so that the IPCA should close 2024 at 4%, after reaching 4.6% in 2023. The expectation is that the increase in Food inflation will be dampened by the continued low inflation of goods and disinflation of service prices.
The scenario also takes into account a change from the zero deficit target to a primary deficit objective of 0.75% of GDP, maintaining the tolerance margin of 0.25 percentage points. “The possibility of reviewing the primary outcome target for 2024 and subsequent years will remain present. The primary result will remain in deficit territory for the foreseeable future”, predicts Bradesco Asset. The projection is for a primary deficit equivalent to 0.6% of GDP in 2024.
Despite this, the manager does not see a large variation in real terms in government spending, which, together with the accommodation of production in the agricultural sector, should take away from the activity.
In parallel, he notes, the Fed should begin reducing the tightening of monetary policy in the United States sooner than expected, taking the country's interest rate to 4.25% by the end of the year, below the 5% previously predicted. Starting with a reduction of 25 basis points in June, the expectation is for a total cut of 125 basis points in the Fed Funds, given the Fed's concern about the slowdown in activity and the slowdown in the job market.
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