December 5, 2013
Matthew Malinowski & Raymond Colitt – Bloomberg, 12/05/2013
Brazil’s central bank said its current pace of interest rate increases remains appropriate to rein in consumer prices, repeating language it used to justify previous half-percentage-point increases. Swap rates rose.
Policy makers, led by President Alexandre Tombini, voted unanimously on Nov. 27 to raise the benchmark Selic rate to 10 percent from 9.5 percent, marking the fifth straight 50 basis-point increase. Monetary policy must remain especially vigilant, officials said in the minutes to their Nov. 26-27 meeting released on the bank’s website.
The central bank has raised borrowing costs by 275 basis points since April as the real dropped the most among major currencies in the past six months and deteriorating fiscal accounts sparked investor concern over a credit downgrade. Indonesia and Pakistan are the only other major economies tracked by Bloomberg that have boosted rates this year.
December 3, 2013
Brad Haynes & Silvio Cascione – Reuters, 12/03/2013
Brazil’s economy contracted in the third quarter for the first time since early 2009, falling short of expectations yet again as plunging investment and idle factories wiped out what had already been sluggish growth.
The economy shrank 0.5 percent between July and September from the prior three months, government statistics agency IBGE said on Tuesday, missing forecasts in what has become a disappointing routine over the last three years. Gross domestic product had been expected to drop 0.2 percent, according to the median forecast of 40 economists polled by Reuters.
The weak quarter underscored mounting economic concerns in Brazil, which has struggled to contain inflation and stay competitive in recent years, tarnishing the promising reputation it earned with a decade of robust growth.
December 2, 2013
Brazil’s inflation may slow to 4 percent on average over the next 10 years, Finance Minister Guido Mantega said on Monday at a seminar in Sao Paulo.
The government targets annual inflation at 4.5 percent, with a tolerance margin of 2 percentage points either way. In the 12 months through October, consumer prices as measured by the benchmark IPCA index rose 5.8 percent.
Mantega added that Brazil’s economic growth will likely accelerate to between 3.6 and 4 percent on average from 2013 to 2022 as the government focuses on boosting investments.
November 25, 2013
Matthew Malinowski – Bloomberg, 11/25/2013
Brazil economists raised their 2014 key rate forecast to the highest level all year as a weakening currency complicates efforts to slow inflation.
Brazil’s central bank will raise the benchmark Selic to 10.50 percent next year, compared with the previous week’s forecast of 10.25 percent, according to the Nov. 22 central bank survey of about 100 analysts published today. Analysts also see the real at 2.30 per dollar by the end of this year, compared to last week’s estimate of 2.27.
President Dilma Rousseff’s administration has struggled to spark economic activity while taming inflation persisting near the upper limit of the central bank’s target range. Consumer prices have come under added pressure from a double-digit drop in the real in 2013. The central bank will extend the world’s biggest rate increase by raising the Selic by 50 basis points this week, according all estimates from 25 economists surveyed by Bloomberg.
November 21, 2013
Raymond Colitt – Bloomberg, 11/20/2013
Investors have never been more pessimistic about Brazil President Dilma Rousseff’s policies, with only 10 percent saying the nation can avoid a credit-rating downgrade in the next year, a Bloomberg Global Poll shows.
Fifty-one percent say they are pessimistic about Rousseff’s policies, compared with 22 percent when she took office in January 2011, according to the poll of 750 analysts, investors and traders who are Bloomberg subscribers. The world’s second-largest emerging market will offer one of the worst opportunities over the next year compared with the U.S., U.K., European Union, Japan, India, Russia and China, respondents say.
The government has been struggling to revive the economy as above-target inflation and a widening budget deficit erode investor and consumer confidence. Rousseff will end her first term next year with the slowest four-year expansion of gross domestic product since 1990, according to the latest central bank survey of economists. Standard & Poor’s in June placed Brazil’s rating on negative outlook, citing weak growth.
November 19, 2013
David Biller – Bloomberg, 11/19/2013
Brazil’s consumer prices rose less than economists forecast in the month through mid-November as the central bank carries out the world’s biggest interest-rate increase. Swap rates fell.
Consumer prices as measured by the IPCA-15 index rose 0.57 percent from Oct. 12 to Nov. 11, the national statistics agency said in a report published on its website today. That is slower than every estimate from 35 economists surveyed by Bloomberg, whose median forecast was for a 0.65 percent increase. Annual inflation of 5.78 percent was below analysts’ 5.87 percent estimate.
President Dilma Rousseff’s government has tried to stem inflation by holding down some regulated prices as policy makers contribute to the effort by boosting interest rates. Consumer prices have risen faster than the 4.5 percent target for more than three years, and have come under added pressure this year due to the weakening currency. While the number came in lower than expected, inflation is still widespread, according to Jankiel Santos, chief economist at Banco Espirito Santo de Investimento.
November 4, 2013
Rogerio Jelmayer – The Wall Street Journal, 11/04/2013
The good news is that Brazil’s inflation rate is likely to show a dip when October figures are released; the bad news is that October’s dip is likely to be the last for several months to come.
Brazil’s 12-month inflation rate is likely to weigh in at 5.85% when October figures are released on Wednesday, according to the median estimate of 12 economists in a survey. That would represent a slight dip from 5.86% as of September and constitute the lowest 12-month rate since December of 2012.
But the victory could prove temporary. Brazil’s inflation rate is still far above the government’s 4.5% target and inflationary pressures are likely to rise, not diminish, in the next few months.
October 31, 2013
Paulo Trevisani & Jeffrey T. Lews – The Wall Street Journal, 10/31/2013
Brazil’s central bank finds itself caught in a quandary: After launching a new program to prevent the national currency from depreciating too abruptly during a volatile summer, officials must decide whether to abandon or alter the program now that the currency is gaining value.
The central bank, like many of its counterparts in emerging markets, has struggled for months to cope with the global market turmoil caused by the twists and turns of U.S. monetary and fiscal policy.
Its task is complicated because Brazil’s inflation, at just under 6%, is running close to the top end of the central bank’s target range. A weaker currency can add to inflationary pressures, but too strong a currency can harm the nations’ exports.
October 23, 2013
Blake Schmidt – Bloomberg, 10/23/2013
Brazil’s real fell on speculation the central bank will limit the rollover of currency swaps that have supported the world’s biggest two-month rally.
The real depreciated 0.5 percent to 2.1837 per U.S. dollar at 3:36 p.m. in Sao Paulo. Swap rates on the contracts maturing in January 2015 dropped two basis points, or 0.02 percentage point, to 10.51 percent.
While the central bank extended maturities on $987 million of foreign-exchange swaps today after rolling over $988 million yesterday, it didn’t say whether it would do so for the rest of the $8.9 billion of contracts maturing Nov. 1.
October 18, 2013
Alonso Soto – Reuters, 10/17/2013
Brazil’s central bank hinted on Thursday it will continue to hike interest rates to battle inflation that remains persistently high despite a stronger local currency.
In the minutes of its last rate-setting meeting, the central bank repeated almost the same language from the previous minutes in a sign that policymakers could extend the rate-hiking cycle.
“There is really no difference between this and the last minutes and that signals that they intend to keep the pace of rate hikes, meaning another 50 basis points at the next meeting,” said Gustavo Rangel, chief Latin America economist for ING in London.