Brazil Real Intervention Out of Sync With Slowdown, IMF Says

July 30, 2014

Sebastian Boyd – Bloomberg, 7/29/2014

The International Monetary Fund said Brazilian central bank President Alexandre Tombini shouldn’t shore up the real as Latin America’s largest economy stalls and inflation accelerates.

Adjusting for inflation, Brazil’s currency was 5 percent to 15 percent stronger than “implied by fundamentals and desirable policies” in 2013, IMF economists wrote in a research report published today. The real has appreciated 5.9 percent this year against the dollar while inflation accelerated to a 13-month high and economic growth slowed.

The central bank said last month it was extending through the end of 2014 a currency intervention program aimed at helping to boost the real and curb prices for imports. After nine consecutive increases in the target lending rate, policy makers held it at 11 percent on July 16 for a second straight meeting. The central bank didn’t return phone and e-mail messages seeking comment today.

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Brazil’s Longer-Term Swap Rates Rise on 2015 Inflation Outlook

July 28, 2014

Filipe Pacheco and Paula Sambo – Bloomberg, 7/28/2014

Brazil’s longer-term swap rates climbed as economists surveyed by the central bank raised their inflation forecasts for 2015, adding to speculation that policy makers will resume raising borrowing costs next year.

Swap rates on contracts maturing in January 2018 increased one basis point, or 0.01 percentage point, to 11.41 percent at 9:52 a.m. in Sao Paulo. The real was little changed at 2.2294 per U.S. dollar.

Economists increased their inflation forecast for 2015 to 6.21 percent from 6.12 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today. President Dilma Rousseff is facing a combination of slower economic growth and above-target inflation as the October election approaches.

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Brazil Eases Reserve Requirements to Inject $13.5 Billion

July 25, 2014

David Biller and Francisco Marcelino – Bloomberg Businessweek, 7/25/2014

Brazil’s central bank is making available an estimated 30 billion reais ($13.5 billion) with measures including reduced reserve requirements as it looks to boost economic activity.

The bank is allowing as much as 50 percent of time deposit requirements to be used on new loans and the acquisition of loan portfolios, the monetary authority said in a statement on its website today. It also increased the number of banks eligible to sell their portfolios, and those able to use up to 20 percent of reserve requirements to grant loans qualifying under development bank BNDES’s program to sustain investment, known as PSI.

President Dilma Rousseff’s administration is seeking to rein in above-target inflation without strangling growth. Policy makers left rates on hold for the second straight monetary policy meeting ending July 16 following the longest rate-raising cycle in the world, as expectations for 2014 economic growth plummeted. Minutes from the meeting that signaled the bank would leave rates on hold have been “compromised” by today’s measures, according to Andre Perfeito, chief economist at Gradual Investimentos.

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Brazil to boost credit to counter economic slowdown

July 25, 2014

Walter Brandimarte – Reuters, 7/25/2014

Brazil’s central bank on Friday announced measures to boost credit in the country’s ailing economy, one week after keeping its benchmark interest rate at its highest level in over two years to fight inflation.

The bank said in a statement it was freeing up an estimated 30 billion reais ($13.5 billion) in the financial system through changes to banks’ reserve requirements.

The move “aims at improving the distribution of liquidity in the economy” given a recent slowdown in credit and relatively low levels of bad loans, the bank said.

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Brazil Analysts Cut 2014 GDP Call Below 1% for First Time

July 23, 2014

Matthew Malinowski – Bloomberg, 7/21/2014

Brazil economists cut their 2014 growth forecast for the eighth consecutive week, as low confidence and above-target inflation curb demand in the world’s second-largest emerging market.

Brazil’s economy will expand 0.97 percent this year, compared with the previous week’s forecast of 1.05 percent, according to the July 18 central bank survey of about 100 analysts published today. That was the lowest estimate since the central bank started publishing the data.

President Dilma Rousseff’s administration is trying to combat the fastest inflation in a year without further crimping demand as she campaigns for re-election in October. The central bank last week held the key rate unchanged for the second straight meeting after having lifted the Selic by 375 basis points in the year through April. Economic growth estimates have fallen as industrial sector sentiment in July dropped for the fourth straight month, while consumer confidence hovers near a five-year low.

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Brazil Mid-July Inflation Decelerates More Than Forecast

July 22, 2014

David Biller – Bloomberg, 7/22/2014

Brazil’s consumer prices in the month through mid-July rose less than economists forecast, as food and transport prices dropped.

Inflation as measured by the benchmark IPCA-15 index decelerated to 0.17 percent from 0.47 percent the prior month, the national statistics agency said on its website today. That was slower than the 0.21 percent median estimate from 37 analysts surveyed by Bloomberg.

Above-target inflation is eroding consumer demand and industrial confidence less than three months before President Dilma Rousseff runs for re-election. Policy makers have responded by cutting back on planned spending and raising benchmark borrowing costs three times this year while extending a currency intervention program to support the real.

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Brazil’s Longer-Term Swap Rates Decline as GDP Outlook Worsens

July 21, 2014

Filipe Pacheco – Bloomberg, 7/21/2014

Brazil’s longer-term swap rates fell as economists lowered their 2014 growth estimate to below 1 percent for the first time, adding to speculation policy makers will limit further increases in borrowing costs.

Swap rates on contracts maturing in January 2021 declined three basis points, or 0.03 percentage point, to 11.58 percent at 9:53 a.m in Sao Paulo, the lowest on a closing basis since Sept. 24. The real was little changed at 2.2257 per U.S. dollar.

Economists reduced their growth forecast to 0.97 percent from 1.05 percent a week earlier, according to the median of about 100 estimates in central bank survey published today. Policy makers held the target lending rate at 11 percent for a second straight meeting on July 16 after nine consecutive increases to curb accelerating inflation.

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Brazil Cuts Job Creation Forecast After Missing Estimate in June

July 18, 2014

Carla Simoes and Matthew Malinowski – Bloomberg, 7/17/2014

Brazil will create fewer jobs this year than previously forecast as the number of new posts in June missed analyst forecasts for the fourth straight month.

Brazil will create about 1 million jobs in 2014, down from a previous forecast of 1.4 million to 1.5 million, Labor Minister Manoel Dias told reporters today in Brasilia. Job creation will slow in the second half of the year, he said.

President Dilma Rousseff is trying to prevent eroding business and consumer confidence from further damaging Brazil’s economy as she runs for re-election in October. The central bank yesterday held the key rate unchanged for the second straight meeting as policy makers weigh above-target inflation against waning demand.

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Brazil risks a recession as presidential campaign heats up

July 17, 2014

Walter Brandimarte – Reuters, 7/16/2014

Brazil’s sluggish economy faces substantial risk of falling into a light recession in 2014, and may already have done so, providing opposition candidates with extra ammunition in the run-up to October’s presidential election.

Latin America’s largest economy has slowed to average growth of just 2 percent a year since President Dilma Rousseff took office in early 2011 and, coincidentally, global demand for commodities ebbed.

Attempts to boost activity by spurring consumption largely backfired as investment failed to catch up with demand, driving inflation higher and eventually forcing the central bank to drive up interest rates.

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Brazil May Economic Activity Falls Less Than Economists Forecast

July 17, 2014

Matthew Malinowski – Bloomberg, 7/17/2014

Brazil’s May economic activity declined less than economists expected, as the central bank keeps rates on hold to avoid damaging demand.

The seasonally adjusted economic index, a proxy for gross domestic product, fell 0.18 percent in May from the prior month after growing a revised 0.05 percent in April, the central bank said today in a report posted on its website. The drop was the biggest since December, when activity fell 1.37 percent. The median estimate of 31 economists surveyed by Bloomberg was for a 0.40 percent decline.

President Dilma Rousseff’s administration has tried to combat the highest inflation in a year without exacerbating a slowdown in economic growth. Officials this year have announced tax cuts and higher spending, and the central bank yesterday kept the key rate unchanged after having lifted borrowing costs 375 basis points in the year through April. Economists forecast government efforts will fail, as they have cut their 2014 growth estimate to the lowest ever.

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