Banco Central do Brasil's monetary policy committee, the Copom, expects slight GDP growth in the third quarter, after a "higher-than-expected" expansion in the second quarter, according to the minutes of their latest meeting.
In addition, the committee, which cut the Selic benchmark interest rate by 50 basis points to 5.50% during a Sept. 17 and 18 meeting, showed signals of further rate cuts going forward.
The committee said its inflation projection was at 3.3% for 2019 and 3.6% in 2020, assuming the Selic rate goes down to 5.00% at the end of 2019 and remains at that level throughout 2020. Meanwhile, a separate Focus central bank survey sees inflation at 3.5% and 3.8% in 2019 and 2020, respectively. Inflation targets for 2019 and 2020 are at 4.25% and 4.00%, respectively.
Agreeing that the newest data suggested the "recovery of the Brazilian economic resumption process," the committee members said coming quarters should show "some acceleration," which will be further reinforced by available stimulus resources from state workers' fund FGTS.
This, according to Copom, will in particular impact the fourth quarter of 2019.
"The committee decided to express its assessment that the consolidation of the benign scenario for prospective inflation should permit additional adjustment of the degree of stimulus," the Copom members noted.
