BRASILIA, May 6 (Reuters) - Brazil's real surged on Thursday
to close at its highest in almost four months against the
dollar, a day after the central bank struck a hawkish tone in
its statement that accompanied a second aggressive hike in
A clutch of major global banks published notes revising
their outlook on Brazil's benchmark Selic rate, which they say
is now likely to rise more quickly or more aggressively.
The real rose around 1.5% on Thursday to 5.2776 per dollar
, its strongest close since Jan. 14. Having traded as weak
as 5.87 in March, the real is now down only 1.6% year-to-date.
Morgan Stanley and BNP Paribas raised their 2021 year-end
calls outright. Citi, Bank of America and Rabobank kept their
forecasts but now anticipate a faster pace of tightening.
Barclays said it could revise its outlook next week.
The 75-basis-point rise in the Selic rate to 3.50% was
flagged by policymakers and predicted by all 29 economists in a
The tone of the accompanying statement was hawkish, notably
that there was no firm commitment to a 'partial normalization'
process and future moves "could be adjusted to assure the
achievement of the inflation target."
"We now think the (central bank) will have to go for a full
normalization and hike rates to 6.5% in 2021 versus our earlier
forecast of 5.0%," BNP Paribas economist Gustavo Arruda and his
team wrote in a note on Thursday.
"Taking into account the more challenging inflation
environment, we now expect two hikes of 75bp in June and August
and three hikes of 50bp in September, October and December,"
Economists at Morgan Stanley raised their 2021 Selic
forecast to 5.50% from 5.00% and the 2022 forecast to 6.50% from
Mauricio Une at Rabobank maintained his forecast for a
further 200 basis points of tightening this year, but now
expects that to be delivered over three policy meetings instead
Citi's Leonardo Porto said he will wait for more hard
economic data and the policy meeting minutes for a clearer idea
on how long Copom will stick with its 'partial normalization
process', but "we recognize the increasing risks of a higher
(Reporting by Jamie McGeever
Editing by Chizu Nomiyama and David Gregorio)