August 26, 2019 / 12:55 PM / a month ago

Brazil inflation expectations fall to new low -survey

BRASILIA, Aug 26 (Reuters) - Brazilian inflation expectations for this year and next have fallen to new lows, a central bank survey of economists showed on Monday, strengthening the view that the central bank will cut interest rates again this year.

Central Bank President Roberto Campos Neto last week signaled that inflation will undershoot the bank’s forecasts, giving policymakers space to further reduce the benchmark Selic interest rate, which was cut last month to a fresh low of 6.00%.

The central bank’s latest weekly ‘FOCUS’ survey of around 100 financial market participants, published on Monday showed that the average 2019 inflation forecast fell to 3.65% from 3.71% the week before.

That is the lowest projection so far this year, and is moving further away from the central bank’s official forecast of 4.25%.

The average 2020 annual inflation forecast fell to 3.85% from 3.90%, also a fresh low this year and edging further below the central bank’s official target of 4.00%.

In a presentation to lawmakers last week, Campos Neto said the “increasingly benign scenario for prospective inflation should allow for further adjustment in the degree of stimulus.”

The central bank is widely expected to reduce the Selic rate at its next meeting in September, with the only debate among economists surrounding the scale of the move: 25 or 50 basis points. (Reporting by Jamie McGeever; Editing by Steve Orlofsky)

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