Markets now see the Brazilian Central Bank on hold throughout next year

According to the Focus survey, year-end Selic expectations remained at 7.00% for 2017, and receded 25bps for 2018 (to 7.00%)

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Selic expectations for year-end 2018 declined 25bps to 7.00%. According to Focus survey, year-end Selic expectations remained flat for 2017 and 2019 (at 7.00% and 8.00%, respectively) and it has receded 25bps for 2018 (to 7.00%). Also, IPCA inflation expectations declined further to 3.08% (-6bps) for 2017 and to 4.12% (-3bps) for 2018, while it has remained flat at 4.25% for 2019. GDP growth expectations also remained flat for 2017 and 2019 (at 0.60% and 2.50%, respectively), and increased 10bps for 2018 (to 2.20%). Finally, the BRL did not change for the three years horizon: at 3.20/USD for 2017 and 3.40/USD for 2019), while it has appreciated for 2018 to 3.30/USD (from 3.35/USD).

BCB placed the full offering of 12,000 FX swaps. After closing, it announced another roll over auction of up to 12,000 contracts (USD 600 million) for today.


The trade deficit in July came in at USD 520 million, below market consensus and our forecast (both at USD 591 million) forecast. This represents a narrowing from the USD 967 million deficit recorded one year ago and resulted in a rolling 12-month trade deficit of USD 9.3 billion, from the USD 9.7 billion as of 2Q17 (USD 11.4 billion in 2016). The trade deficit adjustment came amid an improvement in the energy balance, especially the oil and coal components, while the non- energy balance was broadly stable. At the margin, the trade deficit came in at USD 8.8 billion (seasonally adjusted and annualized), improving from the USD 11.3 billion in 2Q17 and broadly stable from 1Q17 (USD 8.5 billion), mostly due to a narrowing non-energy component.

A gradual improvement in the trade balance is expected during the remainder of the year amid a still weak internal demand. We expect a current-account deficit of 3.7% of GDP this year (4.3% in 2016). ** Full story here.

Fuente: ITAU BBA

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