Brazil March inflation faster than every economist estimate

April 9, 2014

David Biller – Bloomberg, 4/9/2014

Brazil’s consumer prices rose more in March than economists estimated, increasing pressure on the central bank to extend the world’s longest cycle of interest rate increases. Swap rates rose.

Inflation as measured by the benchmark IPCA index accelerated to 0.92 percent from 0.69 percent in February, the national statistics agency said today in Rio de Janeiro. That was faster than forecast by all 40 analysts surveyed by Bloomberg, whose median estimate was for an 0.85 percent rise. Annual (BZPIIPCY) inflation quickened to 6.15 percent from 5.68 percent, marking its fastest rate since July.

The government’s popularity dropped in two polls posted in the past fortnight as Brazilians express concern that prospects for faster inflation will crimp their purchasing power. Policy makers have responded to consumer price pressures by boosting benchmark Selic borrowing costs in every meeting over the past 12 months while signaling that tightening may be coming to an end. Today’s data raise the likelihood that interest rate increases aren’t yet over, economist Enestor dos Santos said.

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Brazil inflation expected to hit highest rate since August

April 8, 2014

Regerio Jelmayer – The Wall Street Journal, 4/7/2014

Brazil’s inflation problem will be back on the front pages this week as the official consumer price index is expected to move above 6% per year, reaching its highest level since August 2013 and pushing up the chances of more interest rate increases.

A survey by The Wall Street Journal of 12 economists showed 12-month inflation rising to 6.08% for the 12 months ended March, up from 5.68% at the end of February. Some see inflation headed above the 6.5% upper limit of the government’s target range.

Behind the price push? Higher airfares during Carnival is one, temporary problem. More worryingly, however, is a shock from food prices that is proving resilient, amid one of the worst droughts in 40 years. And there may be more further down the line, too.

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Brazil economists see faster inflation and slower growth in 2014

April 7, 2014

Matthew Malinowski – Bloomberg, 4/7/2014

Brazil economists raised their 2014 inflation forecast for the fifth straight week and cut their growth estimates as a food price shock curbs purchasing power in the world’s second-largest emerging market.

Brazil’s inflation this year will accelerate to 6.35 percent, compared with the previous week’s forecast of 6.30 percent, according to the April 4 central bank survey of about 100 analysts published today. Analysts also cut their 2014 growth estimates to 1.63 percent from 1.69 percent a week ago.

President Dilma Rousseff’s administration is struggling to spur growth amid above-target inflation. Brazil’s central bank last week lifted the key rate for the ninth straight time after a drought drove up food prices. Policy makers in an accompanying statement signaled they will observe economic progress before deciding on the future path of monetary policy.

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Brazil’s swap rates rise with currency as inflation accelerates

April 1, 2014

Filipe Pacheco – Bloomberg, 4/1/2014

Brazil’s swap rates climbed as a report showed inflation unexpectedly accelerated in the nation’s biggest cities, adding to speculation that the central bank will keep raising borrowing costs.

Swap rates on contracts maturing in January 2017 increased eight basis points, or 0.08 percentage point, to 12.55 percent at 9:49 a.m. in Sao Paulo. The real appreciated 0.5 percent to 2.2605 per U.S. dollar.

The Getulio Vargas Foundation reported today that consumer prices in Brazil’s seven biggest cities rose 0.85 percent in the 30 days ended March 31 compared with 0.83 percent in the prior period. The median forecast of economists surveyed by Bloomberg was for a 0.82 percent increase. Swap rates indicated that traders project that policy makers will lift the target lending rate by a quarter-percentage point to 11 percent tomorrow.

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Brazil’s biggest drought in decades also worsens interest rate outlook

March 25, 2014

Kenneth Rapoza – Forbes, 3/25/2014

Brazil’s worst drought in 50 years will have more than an impact on tomato prices (which rose over 20% recently).  Inflation is now seen cracking through 6% again and that means the Central Bank will likely have to rethink its desired plans to cut interest rates in the second half.

On Monday, the Central Bank’s Focus survey of economists had inflation forecast to hit 6.28% this year.

Last Friday’s release of the March IPCA-15 wholesale price inflation index confirmed the drought’s impact on food prices. The drought was so bad in Brazil’s semi-arid northeast that food inflation is expected to remain for most of the year now.  As it is, Brazil’s food prices have risen almost 20% year to date.

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Brazil economists raise 2014 inflation and selic forecasts

March 24, 2014

Matthew Malinwoski – Bloomberg newsweek, 3/24/2014

Brazil economists raised their 2014 key rate and inflation forecasts, after dry weather caused food prices to surge in the world’s second-largest emerging market.

Brazil’s inflation will accelerate to 6.28 percent this year, compared with the previous week’s forecast of 6.11 percent, according to the March 21 central bank survey of about 100 analysts published today. Analysts expect the bank to raise the benchmark Selic to 11.25 percent by December, compared with a forecast of 11 percent last week.

President Dilma Rousseff is seeking to tame above-target inflation and stimulate economic growth that has been slow to gain traction. Finance Minister Guido Mantega this month met with business leaders to lure investment, while the central bank has lifted the key rate by 350 basis points since April. Inflation is coming under renewed pressure from a jump in food prices and a real that has declined the second-most among major currencies in the past year.

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Dilma’s power problem

February 20, 2014

Keith Johnson – Foreign Policy, 2/19/2014

Brazil, the old joke goes, is the country of the future — and always will be. Unfortunately, when it comes to fulfilling the promise of the country’s rich energy resources, the joke rings only too true.

Brazil’s transformation into an energy powerhouse, seemingly so close just a few years ago, has been hobbled by politics. The country’s ability to take advantage of massive offshore oil resources is increasingly questioned, its once-vaunted biofuels industry is reeling, and there are even concerns this year about keeping the lights on and power companies solvent.

There are plenty of things to blame for the hiccups, starting with a severe drought that has hamstrung Brazil’s ability to generate electricity from hydroelectric power, which in turn as led to a spike in fuel imports to run other power plants.

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Brazil’s Tombini sees inflation falling in 2014, beyond

February 19, 2014

Paulo Trevisani – Wall Street Journal, 2/18/2014

Brazil’s struggle to bring down inflation is unlikely to end soon, though it is showing early results, the country’s central bank governor indicated Tuesday.

At the same time, Alexandre Tombini steered clear of joining a large chorus of emerging market central bankers blaming the U.S. Federal Reserve for recent financial market turmoil outside the U.S.

In a conference call with foreign press, Mr. Tombini noted the central bank’s seven interest rate increases over the last 10 months have helped push inflation down by about one percentage point to 5.6%.

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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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Brazil swap rates rise on drought concern as currency declines

February 11, 2014

Blake Schmidt – Bloomberg Businessweek, 2/11/2014

Brazil’s swap rates climbed on concern policy makers will have to keep raising borrowing costs to curb inflation as the nation’s drought and heat wave contribute to higher food and energy prices.

Swap rates on contracts maturing in January 2015 rose four basis points, or 0.04 percentage point, to 11.35 percent at 12:46 p.m. in Sao Paulo, erasing earlier declines. The real depreciated 0.1 percent to 2.4120 per dollar as Federal Reserve Chairman Janet Yellen pledged to maintain the policy of scaling back in “measured steps” a U.S. stimulus program that had supported emerging markets.

Brazil’s worst drought and heat wave in decades is threatening to reduce crop yields and drive up prices. Receding levels in reservoirs may force the nation’s utilities to rely on expensive alternatives to hydroelectric power. To curb inflation, policy makers lifted the target lending rate last month by a half-percentage point for a sixth straight meeting, increasing it to 10.50 percent.

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