March 6, 2014
Matthew Malinwoski & Raymond Colitt – Bloomberg, 3/6/2014
Brazil’s central bank signaled today it will continue tightening monetary policy as above-target inflation remains persistent. Swap rates rose.
Policy makers led by bank President Alexandre Tombini voted unanimously on Feb. 26 to slow the pace of rate increases, raising the benchmark Selic rate to 10.75 percent from 10.5 percent after six straight half-point increases. The central bank’s monetary policy will help offset inflationary pressure from a currency depreciation, officials said in the minutes of their Feb. 25-26 meeting published online today.
The central bank considers “appropriate the continuation of the adjustment of monetary conditions under way,” according to the minutes. “Currency depreciation constitutes a source of inflationary pressure in the shorter term.”
February 27, 2014
David Biller – Bloomberg, 2/27/2014
Brazil’s economy grew in the fourth quarter more than economists forecast as an increase in investment offset a drop in industrial production.
Brazil’s gross domestic product rose 0.7 percent in the fourth quarter from the prior three months after contracting 0.5 percent in the third quarter, the national statistics agency said today in Rio de Janeiro. That is above every forecast from 49 analysts surveyed by Bloomberg, whose median estimate was for 0.3 percent growth. Brazil’s GDP expanded 2.3 percent in 2013.
Today’s data will help boost lagging confidence in the world’s second-biggest emerging market, according to Jankiel Santos, chief economist at Banco Espirito Santo de Investimento. PresidentDilma Rousseff has overseen the slowest three-year growth period in a decade, with above-target inflation eroding consumer and business confidence. Policy makers led by central bank President Alexandre Tombini halved the pace of key rate increases yesterday as they work to tame inflation without further jeopardizing growth.
February 25, 2014
Blake Schmidt & Josue Leonel – Bloomberg, 2/25/2014
Brazil’s swap rates dropped for a fourth straight day on speculation that policy makers convening for a two-day meeting will limit increases in borrowing costs to a quarter-percentage point.
Swap rates on contracts due in January 2019 sank 12 basis points, or 0.12 percentage point, to 12.44 percent at 4:32 p.m. in Sao Paulo, the lowest since Nov. 22. The real depreciated less than 0.1 percent to 2.3431 per U.S. dollar.
Policy makers will raise the target lending rate by 25 basis points tomorrow to 10.75 percent, according to the median estimate of 59 economists surveyed by Bloomberg, after six straight increases of a half-percentage point. Brazil’s construction costs index rose 8 percent in February from a year earlier, the slowest pace since September, the Getulio Vargas Foundation reported.
February 24, 2014
Matthew Malinowski – Bloomberg, 2/24/2014
Brazil economists cut their 2014 economic growth forecast for the third straight week, as consumer confidence in the world’s second-largest emerging market plunges to the lowest level in nearly five years.
Brazil’s gross domestic product will expand 1.67 percent this year, compared with the previous week’s forecast of 1.79 percent, according to the Feb. 21 central bank survey of about 100 analysts published today. Economists also cut their 2015 growth estimate to 2 percent from 2.10 percent last week.
President Dilma Rousseff’s administration has been forced to shift economic policies, as stimulus measures and increased public spending last year fanned consumer prices without spurring growth. Officials on Feb. 20 said they would cut billions in spending to slow inflation and cut debt. Central bank President Alexandre Tombini said last week that boosting the benchmark rate by 325 basis points is working, and added that fourth quarter growth will be positive.
February 21, 2014
Brazil January’s current account deficit was the biggest ever posted, central bank data showed on Friday, the latest evidence of the rapid deterioration of its balance of payments as Brazilians continue to spend heavily on imports and trips abroad.
The commodities’ powerhouse posted a current account deficit of $$11.591 billion in January, slightly above the previous monthly deficit record of $11.350 billion recorded in January of last year.
The country had been expected to post a deficit of $11.7 billion, according to the median forecast of 20 analysts in a Reuters survey. Brazil’s current account deficit in December was $8.67 billion.
February 20, 2014
David Biller – Bloomberg, 2/20/2014
Brazil’s unemployment rate in January was lower than all estimates from economists surveyed by Bloomberg, as the labor market remained strong amid rising interest rates.
The jobless rate rose to 4.8 percent from 4.3 percent in December, the national statistics agency said in Rio de Janeiro today. That was lower than forecast by all 37 economists surveyed by Bloomberg, whose median estimate was 5.1 percent. Adjusted for seasonality, the January jobless rate fell from December and was the lowest on record, according to Carlos Kawall, chief economist at Banco J. Safra in Sao Paulo.
Unemployment in the world’s second-largest emerging market ended 2013 at a record low, helping boost consumer demand that in turn stoked above-target inflation. Central bank President Alexandre Tombini has responded by boosting benchmark borrowing costs in seven straight meetings while introducing measures to stem a decline in the real that threatens to increase import prices.
February 18, 2014
Matthew Malinowski – Bloomberg, 2/18/2014
Brazil’s interest rate increases that pushed borrowing costs to the highest in two years have succeeded in slowing inflation, central bank President Alexandre Tombini said today. Swap rates fell.
Tombini said the full impact of the 3.25 percentage point increase to the benchmark Selic rate hasn’t fully materialized yet. The central bank will continue to keep a close eye on inflation and make sure it slows in 2014 and beyond, he said.
“Monetary policy operates with a lag. There is still impact of what we have done so far on inflation going forward,” Tombini said today about boosting the benchmark Selic rate. “We are doing our homework, fighting inflation. To a large extent, we have been successful.”
Traders reinforced bets the central bank will slow the pace of interest rate increases next week after Tombini’s comments. Swap rates on the contract due January 2015, the most traded in Sao Paulo today, reversed an earlier increase and fell 0.07 percentage point to 11.15 percent at 1:19 p.m. local time.
February 6, 2014
The Economist, 4/8/2014
“IN BRAZIL,” Pedro Malan, a former finance minister, likes to say, “even the past is unpredictable.” The dictum has come to haunt Itaú Unibanco, the advisory board of which Mr Malan chairs. The bank, along with Banco do Brasil and Spain’s Santander, awaits judgment by the supreme court over its actions a quarter of a century ago. Depositors claim the trio’s subsidiaries took advantage of government efforts to quash hyperinflation to fleece owners of inflation-linked accounts. If the justices side with depositors, other lenders that offered similar instruments may also be on the hook. The bill could reach 150 billion reais ($62 billion), according to the central bank.
The finance minister, Guido Mantega, and the central bank’s governor, Alexandre Tombini, have signed an open letter warning that a defeat for the banks may starve the economy of credit. (So did all their living predecessors, regardless of political or economic persuasion.) Such a decision might also prompt Banco do Brasil and Caixa Econômica Federal, which are state-controlled and between them hold roughly half of all savings accounts, to seek a government bail-out, denting Brazil’s already fragile public finances.
Walter Faiad of the Consumer Protection Institute, an outfit involved with the savers’ claims, argues that banks would lose closer to 15 billion reais, mainly because relatively few of their former depositors have the will and resources to go to court. Murilo Portugal, head of the Federation of Brazilian Banks (Febraban), which co-ordinates the industry’s legal strategy, counters that between 2005 and 2013, as the 20-year statute of limitations drew near, banks received as many as 1.4m claims. And the court may interpret some pending class actions brought by public prosecutors as representing all of the tens of millions of Brazilians who held a savings account at the time.
February 4, 2014
Filipe Pacheco – Bloomberg, 1/3/2014
Brazil’s real fell to a five-month low in an emerging-market selloff as economists reduced their currency forecast and the trade deficit widened to a record.
The real depreciated 1.1 percent to 2.4403 per dollar at the close in Sao Paulo, the weakest level since Aug. 21. A Bloomberg customized index tracking 20 emerging-market currencies fell 0.4 percent today to the lowest since 2009 after declining 3 percent last month. The Bloomberg-JPMorgan Latin America Currency Index of the region’s most-traded currencies, slid 1 percent today to a decade low.
Brazil’s currency will fall to 2.47 per dollar by the end of the year, according to the median of about 100 estimates in a central bank survey of economists published today, compared with the forecast of 2.45 a week ago. Brazil posted a trade deficit of $4.06 billion in January, the biggest on record.
January 27, 2014
Blake Schmidt – Bloomberg, 1/27/2014
Brazil’s swap rates climbed after central bank President Alexandre Tombini said policy makers will fight inflation as the real weakens, reviving speculation that the central bank will extend increases in borrowing costs.
Swap rates on contracts maturing in January 2016 rose three basis points, or 0.03 percentage point, to 12.10 percent at 12:44 p.m. in Sao Paulo. The real depreciated 0.5 percent to 2.4092 per U.S. dollar after tumbling 2.3 percent last week as part of a broad decline in emerging-market currencies.
The central bank is combating inflation in the context of a weaker real, Tombini said at a presentation in London today. The currency has dropped 9.2 percent in the past three months on concern fiscal deterioration will lead to a lower credit rating and amid speculation that the tapering of Federal Reserve stimulus will erode demand for Brazil’s assets.