2017.09.2120:44:00UTC+00BRAZIL: Inflation Expectation By Year-end Cut To 3.2% - Central Bank

The Brazilian central bank's Quarterly Inflation Report presents revised projections for inflation decelerating in 2017 and 2018, suggesting that the monetary authority still has room to lower interest rates.

In the central bank's reference scenario, which considers the interest rate projection of the Focus survey and a constant exchange rate of R$ 3.10 over the entire forecast horizon, the projection for annual inflation fell from 3.8% in the previous quarterly report to 3.2%. For 2018, the estimate was cut to 4.1%, from 4.3%, on the same basis of comparison. According to the report, inflation will decrease to 3.9% by the end of 2019 and remain at that level through 2020.

In the market scenario, which considers the interest rate and foreign exchange projections in the Focus survey, inflation projections also fell from 3.8% to 3.2% by the end of 2017 and from 4.5% to 4.3% by the end of 2018.

Inflation continues at that level for the second quarter of 2019, when it should fall to 4.2%, remaining at that level until the first quarter of 2020, when it should fall to 4.1% and end that year at that level.

Meanwhile, the central bank's projection for administered prices this year rose to 7.4%, from 5.9% in the previous report, while for 2018 it fell to 5.2%, from 5.5%. For 2019 and 2020, the Brazilian central bank expects the increases in administered prices to reach 4.3% and 4.2%, respectively.