20181220-法国巴黎银行-Brazil_s_inflation_report__Tightening_can_wait_6页_519kb

Brazil Inflation Report Summary

Core Content

The document provides an analysis of Brazil's inflation outlook and the role of the National Development Bank (BNDES) in the country's economic framework. It is prepared by the BNP Paribas group and is intended for professional clients and eligible counterparties, as well as individuals with relevant investment experience. The report is not investment research and does not constitute an offer to sell or purchase any financial instruments.

Key Messages

• Inflation Outlook: The BCB's Q4 inflation report forecasts inflation to remain at or below the target until 2021, assuming the current consensus on interest rates and exchange rates.
• Below Consensus Forecast: The report suggests that inflation will be at 3.5% in 2019, with the Selic rate held constant until mid-year.
• Above Consensus Growth: With an above-consensus growth forecast of 3.0% in 2019, the report indicates that inflation may accelerate to 4.0% in 2020, surpassing the BCB's projection.
• 2021 Scenario: In an alternative scenario where the Selic rate and currency remain flat, inflation would end 2021 at 4.1%, exceeding the target of 3.75%.
• BNDES Policy Impact: The BCB conducted two ad-hoc studies on BNDES:
  • The first study highlights the fiscal benefits of reducing subsidies on BNDES loans to the private sector.
  • The second study examines the credit market impact, noting that companies have started frontloading loan repayments to the National Treasury due to reduced subsidies, with 90% of these companies likely substituting BNDES loans with market credit.

Inflation and Interest Rate Forecast

• The report expects the Selic rate to remain at 6.5% until mid-2019.
• A 100bp hike is anticipated by the end of 2019, aligning with the recent consensus.
• The report acknowledges downside risks to the end-2019 forecast but prefers to maintain the current outlook while observing the new BCB board's reaction function.

Regulatory and Disclosure Information

• The document is non-independent research and may be subject to conflicts of interest.
• It is a marketing communication and not investment research under MiFID II.
• The report includes important disclosures for options, ETFs, and securities not registered under US law.
• It is intended for Qualified Investors, including regulated financial intermediaries, insurance institutions, pension funds, and professional treasury operators.
• The report is not suitable for retail investors and must not be shared with non-Qualified Investors without prior consent.

Legal and Compliance Notes

• The content may be subject to change and is not to be relied upon as authoritative.
• BNPP may have financial interests in the entities mentioned and may engage in transactions inconsistent with the report's views.
• The document includes performance data based on back-testing and simulations, which may not reflect real-world conditions.
• BNPP disclaims any liability for errors or omissions and for any use of the information provided.
• The document is strictly confidential and may not be reproduced or distributed without prior written consent.

Regional Authorizations

• The report is distributed in various regions under specific authorizations:
  • UK: Communicated by BNPP London Branch, authorized by ECB, ACPR, and FCA.
  • France: Produced by BNPP SA and BNPP Arbitrage, authorized by ECB and ACPR.
  • Germany: Distributed by BNPP S.A. Niederlassung Deutschland, authorized by ECB and ACPR.
  • Ireland: Distributed by BNPP S.A., Dublin Branch, authorized by ECB and ACPR.
  • Italy: Distributed by BNPP Succursale Italia, authorized by ECB, ACPR, and Banco de Portugal.
  • Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized by ECB, National Bank of Belgium, and AFM.
  • Portugal: Distributed by BNPP - Sucursal em Portugal, authorized by ECB, ACPR, and Banco de Portugal.
  • Spain: Distributed by BNPP S.A., S.E., authorized by ECB and ACPR.

Additional Notes

• The report may contain hypothetical performance simulations and is not a guarantee of future results.
• BNPP and its affiliates may hold positions or act as market makers in the financial instruments discussed.
• The document is not a prospectus or public offering and should not be used for investment decisions without further information.

Conclusion

The report offers insights into Brazil's inflation outlook and the fiscal and credit market implications of BNDES policy changes. It emphasizes the importance of the BCB's monetary policy and the potential for inflation to rise above target levels in 2020 and 2021, depending on economic conditions and policy decisions. The document is tailored for professional investors and includes extensive regulatory and compliance disclosures.