Brazil presidential rivals clash over central bank

October 1, 2014

Samantha Pearson – Financial Times, 9/30/2014

It looks like a scene from a low-budget gangster movie. Four men in suits gather around a table in a dark room to plot an apparent financial scam, winking and shaking hands.

However, this is the Brazilian central bank, or rather, an illustration of what it would look like if it were given formal autonomy, according to one of President Dilma Rousseff’s recent scaremongering campaign videos. “This would mean handing over to the bankers a huge power to make decisions about your life and your family – the interest you pay, your job, prices, and even salaries,” the narrator explains, cutting to a family whose food slowly disappears off their table.

Central bank autonomy, a seemingly obscure topic in a country where at least one in 10 adults are illiterate, has become a central controversy of the Brazilian presidential election, which kicks off on Sunday and is likely to extend to a run-off on October 26.

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Brazil Central Bank Cuts Inflation Forecast on Slow Growth

September 30, 2014

Matthew Malinowski and Mario Sergio Lima – Bloomberg, 09/29/2014

Brazil’s central bank cut its 2014 inflation forecast, saying the world’s second-biggest emerging market will grow at a “disinflationary” pace over the next quarters.

Consumer prices will rise 6.3 percent this year if policy makers keep the benchmark Selic (BZSTSETA) at 11 percent, according to the reference outlook in the quarterly inflation report published today. The inflation forecast compares with a 6.4 percent estimate for 2014 in the June report. Consumer prices will rise 5.8 percent in 2015, compared with a 5.7 percent forecast in June. Policy makers also said the economy will expand 0.7 percent this year, down from the previous estimate of 1.6 percent.

“Taking into account the growth outlook for the next quarters, the committee assesses that the output gap over the next quarters will remain in disinflationary territory,” policy makers said. They reiterated inflation will converge toward its 4.5 percent target in 2016.

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Brazil bank lending dormant as new round of stimulus fails

September 26, 2014

Guillermo Parra-Bernal and Luciana Otoni – Reuters, 9/26/2014

Bank lending in Brazil slowed for a seventh straight month in August, another sign that recent measures to unlock personal credit failed to offset the impact of high borrowing costs and weak economic activity.

Outstanding loans in Brazil’s banking system rose 11.1 percent in the 12 months through August, the central bank said in a report published on Friday. According to Thomson Reuters calculations, the annual growth of bank loan books is running at the slowest pace since at least late 2003.

Lending rose 1 percent in August from the prior month, reaching 2.86 trillion reais ($1.18 trillion), the report said. Loans in arrears for 90 days or more, the industry’s benchmark gauge for credit delinquencies, remained stable at 5 percent of outstanding loans last month.

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Brazil inflation: on the up again

September 19, 2014

Jonathan Wheatley – Financial Times, 9/19/2014

As Brazil’s polling day draws closer, another data point emerged on Friday for the voters’ consideration: consumer price inflation is back above the upper limit of the government’s target range and shows no sign of falling back soon.

The IBGE, Brazil’s statistics office, said CPI in the month to mid-September was 0.39 per cent, bringing the accumulated rate over the past 12 months to 6.62 per cent. That was above the consensus forecast of 0.35 per cent for the month, according to Bloomberg.

Inflation is running at its fastest rate in more than a year, just as the campaign for elections on October 5 heats up. Until recently, voters seem to have paid little attention to Brazil’s weakening economy, which was in recession in the first half of this year. But a wave of bad economic data may have contributed to the recent poor performance in opinion polls of Dilma Rousseff, hoping to be re-elected to the presidency, as voters make the connection between economic mismanagement and the woeful standard of Brazil’s public services, which brought thousands of protesters onto the streets last year.

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Arminio Fraga offers Brazil an orthodox path

September 19, 2014

Joe Leahy – Financial Times, 9/17/2014

Arminio Fraga’s assessment of what is wrong with Brazil explains why he is the market’s choice to be finance minister after next month’s election.

“There`s a clear feeling the government is lost, it has picked the wrong model,” Mr Fraga says in an interview at his office in Leblon, Rio de Janeiro, almost within hearing distance of the Atlantic waves crashing on to the city’s beaches a block or two away.

Mr Fraga advocates a return to economic orthodoxy. A former managing director with financier George Soros and Brazilian central bank president, who co-founded his own hedge fund Gavea Investimentos before selling it to JPMorgan, Mr Fraga is one of Brazil`s most respected economists. He is seen as the country’s version of Raghuram Rajan, the University of Chicago economist who became India’s central bank governor last year.

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Brazil’s July Economic Activity Increases More Than Forecast

September 12, 2014

Mario Sergio Lima – Bloomberg, 9/12/2014

Brazil’s economic activity in July rose more than economists forecast, as the central bank signals it will keep interest rates on hold in the world’s second-biggest emerging market.

The seasonally adjusted economic index, a proxy for gross domestic product, rose 1.50 percent in July from the prior month after contracting a revised 1.51 percent in June, the central bank said today in a report posted on its website. The median estimate from 30 economists surveyed by Bloomberg was for a 1 percent expansion.

Brazil’s economy slipped into recession in the second quarter as above-target inflation erodes consumer and business confidence. Moody’s Investors Service cut the nation’s credit rating outlook this week, citing “the absence of any signs of a recovery.” With presidential elections less than a month off, economic management has become central to the campaign.

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Brazil Signals Key Rate on Hold Until Next Government Sworn In

September 4, 2014

David Biller and Raymond Colitt – Bloomberg, 09/03/2014

Brazil’s central bank signaled borrowing costs will remain unchanged until at least the end of the current administration in December as policy makers are trapped between a recession and above-target inflation.

The bank’s board, led by President Alexandre Tombini, yesterday held the benchmark rate at 11 percent for the third straight meeting, removing the phrase “at this moment” from the communique in an indication the key rate will remain on hold, Andre Perfeito, chief economist at Gradual Investimentos, said. All except one of the 54 analysts surveyed by Bloomberg correctly forecast the decision.

President Dilma Rousseff is trailing in polls as inflation near the ceiling of the target range has helped to erode consumer and business confidence. Yesterday’s monetary policy decision was the last before Brazilians select their leader in October. Marina Silva, who pledges to give the central bank president autonomy to bring inflation to the 4.5 percent target, would beat the incumbent in a runoff, polls show.

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