XP raised its inflation estimates for this year and next, although it improved its forecast for the exchange rate to the end of 2022, with the impact of the war in Ukraine expected to weigh on consumers’ pockets.
Now, the financial institution expects the IPCA to rise 7.0% in 2022 and 4.0% in 2023, against rates of 6.2% and 3.8%, respectively, predicted in the previous scenario.
“The change is the result of the incorporation of both stronger current results than we had projected, as well as a worse balance of risks going forward,” said XP in a report signed by economists, strategists and analysts, including Caio Megale, chief economist .
XP cited “more persistent impacts of the war” in Ukraine and said food and fuel prices were boosting current inflation.
“On the other hand, the more appreciated exchange rate will help to contain inflation in the year”, pondered XP, which revised its projection to the dollar level at the end of 2022 to R$ 5.00, against R$ 5.20 previously foreseen. For the end of 2023, an estimate was maintained that the US currency will remain at R$5.30.
Behind the recent devaluation of the dollar –which accumulates a 16% drop in the year against the real, whose performance in the period is the best in the world–, XP pointed out the rise in commodity prices, the low vulnerability of Latin America to the conflict in Ukraine and the fact that the Central Bank started raising rates earlier and at a faster pace than its peers, making local fixed income more attractive.
The dollar was trading around R$4.66 this morning.
“But there are risks ahead that tend to partially reverse the movement” of depreciation of the US currency, warned the financial institution. “If the war in Ukraine moves towards a solution, we do not expect further increases in commodity prices. Likewise, the reopening of Eastern European economies tends to generate outflows of resources currently allocated in Latin America.”
In addition, the report cited the normalization of monetary policies in developed and other emerging nations, as well as domestic electoral uncertainties, as possible supporting factors for the dollar against the real.
For the Selic rate, currently at 11.75%, XP maintained its projection that interest rates will reach 12.75% at the end of the BC’s monetary tightening cycle.
Economic growth forecasts for this year and next also remained unchanged. “We maintain the zero rate of change projection for 2022 GDP, but we attribute an upward bias. For 2023 GDP, we continue to forecast growth of 1.2%, considering the dissipation of the shocks of the pandemic and the war in Eastern Europe,” XP said.
Source: CNN Brasil
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