Central Banker Tombini says Brazil well-prepared for QE pullback

April 10, 2014

Pedro Nicolaci da Costa – Wall Street Journal, 4/10/2014

Brazil has built up enough domestic buffers against rapid shifts in capital flows to allow it to withstand a pullback from unconventional interest rate policy in the world’s largest economies, Central Bank Governor Alexandre Tombini said.

Mr. Tombini agreed in part with Indian central bank chief Raguram Rajan, who argued during a Brookings Institution speech that aggressive monetary easing in advanced economies had made life harder for developing countries.

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Brazil raises key rate for ninth straight meeting to 11%

April 3, 2014

Matthew Malinowski & Raymond Colitt – Bloomberg, 4/2/2014

Brazil signaled that the world’s longest rate tightening cycle might be coming to an end and raised borrowing costs for a ninth straight meeting.

The bank’s board, led by its President Alexandre Tombini, today voted unanimously to raise the Selic rate to 11 percent from 10.75 percent, as forecast by all 57 economists surveyed by Bloomberg. Policy makers have raised borrowing costs by 375 basis points, or 3.75 percentage points, in less than a year.

The bank at its last meeting in February signaled that tightening might soon end by halving the pace of rate increases. Brazil in the last year has increased borrowing costs more times than any other central bank worldwide, with the total increase in borrowing costs trailing only Turkey among major economies. Policy makers’ efforts have also been helped by the second-biggest currency gain among emerging markets since January.

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Brazil economists lower selic forecast for second straight week

March 10, 2014

Matthew Malinowski – Bloomberg, 3/10/2014

Brazil economists cut their 2014 key interest rate forecast for the second straight week, as 350 basis points in borrowing cost increases since last year threaten to undermine growth.

Brazil’s central bank will lift the benchmark Selic to 11 percent this year, compared with analysts’ estimates of 11.13 percent last week and 11.25 percent two weeks ago, according to the March 7 central bank survey of about 100 economists published today.

President Dilma Rousseff’s administration is combating prospects of faster inflation and slower growth. While the economy expanded more than analysts’ estimates in the fourth quarter, both consumer and industrial confidence remain low. The central bank on Feb. 26 halved the pace of key rate increases as factors including a weaker real pressure consumer prices even as demand remains uneven.

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Brazil signals further tightening on persistent inflation

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.”

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Brazil fourth quarter growth exceeds all analyst forecasts

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.

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Brazil swap rates fall before Central Bank decision: Real slips

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.

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Brazil economists cut 2014 growth forecast for third week

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.

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Brazil January jobless rate below all economist forecasts

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.

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Tombini says Brazil has had success in effort to slow inflation

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.

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