Latin America Economic Research

Research evidence excerpt

Latin America Economic Research

ctions for 4Q27, using the consensus Selic mance. Investment excluding the import of platforms, which

rate path, are further deviating from the target, the BCB distorts the data, has recovered from the trough of mid-1Q,

affirmed that the trajectory that would deliver a 3% projection but the estimated decline in April still leaves it tracking only

by 4Q27 would leave 1Q28 — the relevant horizon at the a mild growth rate in 2Q (Figure 1). When including the

next meeting — below the target. Against this backdrop, the import of oil platforms that helped to boost 1Q investment

Committee deemed it appropriate to continue its calibration growth, headline investment is likely to fall substantially this

cycle "at this moment." quarter.

In the past, this wording has been associated with a potential Figure 1: Consumption, investment and economic activity indexes*

moderation in the pace of Selic changes ahead, leaving open %3m/3m, saar Cons. Activity Index

the option of a pause in the cycle as soon as the next meeting, 10 Eco. Activity Index

in August. The Committee also described the economic out- Invest. Activity Index

look in a more hawkish manner: it added a fourth upward fac- 5

tor to its balance of risks, and it recognized the GDP growth

acceleration in 1Q and the inflation above the ceiling of the 0

target. The combination of this communication and the char-

acterization of the outlook raised the bar for more cuts ahead. -5

However, the Board reaffirmed that the extent of the calibra-

-10

tion cycle will depend on incoming information, not closing 2025 2026 2027

the door for a continuation of the cycle if the data allows. Source: BCB, IBGE and J.P. Morgan. CAI & IAI by J.P. Morgan; economic activity index by BCB