April 18, 2013
The Economist, 04/20/2013
A CENTRAL bank knows it has lost control of inflation expectations when price rises become the subject of running gags. In Brazil the jokes feature tomatoes, which have suddenly become very pricey following floods, droughts and a big increase in freight costs. Social-media sites buzz with cartoons of bank robbers making off with crates of tomatoes and lottery winners bathing in purée. Even organised crime is diversifying into fruit: customs officers say that Paraguayan smugglers have added Argentine tomatoes to their Brazil-bound trade in drugs, cigarettes and knock-off electronics.
Official figures published on April 10th show that Brazil’s inflation problem goes well beyond salad. Prices rose by 6.6% during the past year, breaching the two-point tolerance band around the Central Bank’s 4.5% target. The price of more than two-thirds of the items used to calculate inflation rose in the past month. Now the mockery seems to have spurred the bank to act. On April 17th it raised the base interest-rate by 0.25 points, to 7.5%. Market watchers expect rates to hit 8.5% by the year’s end.
The belated rise comes just as it has sunk in that Brazil’s economy is failing to regain momentum after stalling last year. Fewer new jobs are being created. Industrial production and an economic-activity index widely seen as a leading indicator of GDP growth both fell in February after rising in January. Core retail sales fell for the first time in almost a decade, a particularly worrying sign given that only domestic consumption kept Brazil out of recession in 2012.
March 14, 2013
Tom Murphy & Rogerio Jelmayer – Fox Business/Dow Jones Newswires, 02/14/2013
The central bank revealed much of its thinking in minutes released Thursday from its March 6 monetary-policy meeting. At the meeting, the central bank held its Selic base interest rate steady at an all-time low of 7.25%. But a brief statement after the meeting hinted at possible data-based interest rate hikes in the near term.
The minutes of the meeting showed a striking level of concern for continued inflationary pressures.
The minutes stated that Brazil’s inflation problem can no longer be viewed “as a temporary condition.” The minutes said that inflation has proven resilient and may have reached “a new, and higher plateau.”
February 27, 2013
Jeff Fick – The Wall Street Journal, 02/27/2013
Brazil’s real closed stronger against the U.S. dollar Wednesday as concerns about local inflation and Italy’s political uncertainties faded.
The real exited active trading Friday at BRL1.9722 to the U.S. dollar, stronger than Tuesday’s closing price fixed at BRL1.9829, according to Tullett Prebon via FactSet.
Brazil’s currency tracked gains by the euro, seen as a key barometer for the real, as global markets rebounded from this week’s selloff on inconclusive results from the Italian elections. Investor appetite for riskier assets such as emerging-market currencies recovered after Italy successfully sold about $8.5 billion of bonds, although at the highest yields since October 2012.
February 13, 2013
Tom Murphy – The Wall Street Journal, 13/02/2013
SAO PAULO–The Brazilian real ended active trading Wednesday slightly stronger against the Friday close in thin post-holiday volume.
The real ended active trading at BRL1.9642 to the dollar, stronger from the Friday close of BRL1.9698, according to Tullett Prebon via FactSet. Brazilian markets were closed Monday and Tuesday for the annual Carnival festivities.
Traders said there was little pressure from either side of the market Wednesday, with the real drifting to a stronger position on U.S. dollar inflows from foreign investors, mainly in Brazilian stocks, and from overseas bond issues by Brazilian companies.
December 7, 2012
David Biller, Andre Soliani – Bloomberg Businessweek, 12/07/2012
Brazil’s inflation unexpectedly accelerated as central bank President Alexandre Tombini reiterated his plan to hold interest rates at their current level, while investors bet on more cuts next year.
Prices as measured by the benchmark IPCA index rose 0.6 percent in November, the national statistics agency said today in Rio de Janeiro, more than any economist forecast in a survey by Bloomberg. Swap rates jumped.
Tombini told reporters yesterday that the bank is standing by its monetary policy strategy after traders rocked markets with bets he will resume cutting borrowing costs. The bank yesterday released its minutes to last week’s monetary policy meeting and pledged to keep the Selic rate at a record low 7.25 percent for a prolonged period.
October 18, 2012
The Economist, 10/20/2012
ON OCTOBER 10th Brazil’s Central Bank cut its policy interest rate for the tenth time in just over a year, to 7.25%. The move surprised analysts, since rates were already historically low and inflation above the centre of the monetary-policy committee’s 2.5-6.5% target. Neither economic growth, likely to finish the year at an anaemic 1.5%, nor the currency, which tends to rise with rates as return-seeking foreign investors pile in, are supposed to play a part in its deliberations. But most analysts now believe that its decisions are taken with an eye to boosting growth and weakening the currency, and that unless inflation threatens to break the 6.5% barrier, rates will stay low for some time.
For now, subdued global demand means that inflation is unlikely to slip its leash. But in the longer term the government will have to rein in public spending and push through difficult reforms if it wants Brazil to grow faster than 3-4% a year without fuelling inflation. Recent moves to cut payroll taxes, limit public-sector pay rises, reduce energy costs and improve a woeful transport infrastructure should help to raise this distinctly modest economic speed limit. They have also convinced many that the president, Dilma Rousseff, will do whatever it takes to save the bank from having to hike again.
December 15, 2011
Jeffrey T. Lewis – Dow Jones Newswires/NASDAQ, 12/15/2011
The total stock of foreign direct investment in Brazil more than tripled in the five years through the end of 2010 to $660.5 billion, the central bank said Thursday.
The figure is equal to 30.8% of gross domestic product, the central bank said in a survey that’s carried out every five years.
The total includes investments in businesses and inter-company loans. Business investments alone came to $579.6 billion and inter-company loans were $80.9 billion.
October 7, 2011
Food production in August declined in the inter-harvest period
Output at Brazil’s mines and factories slowed in August, falling a seasonally adjusted 0.2% from July as production in the country’s industrial sector suffered the impact of cheap imports and the sluggish global economy.
However industrial production rose 1.8% in August compared to the same month a year ago, the Brazilian Census Bureau, or IBGE, said this week. In the rolling 12-month period, industrial production climbed 2.3% in August versus a rise of 2.9% in the 12-months through July.
Brazil’s manufacturing sector has showed signs of decelerating activity since June, undermined by a strong Real that had stoked imports of cheaper goods. The Brazilian Central Bank also attempted to tamp down domestic demand by implementing five consecutive interest rate hikes after prices started to spiral out of control.
September 13, 2011
“We’re not betting on a catastrophe,” says Alexandre Tombini, the Brazilian Central bank president
Brazilian Central bank President Alexandre Tombini said in an interview with the local Valor Economico newspaper that Europe’s expected difficulty in implementing a rescue package and slowing global growth are likely to justify the bank’s recent surprise cut to interest rates.
Brazilian inflation will likely ease 2 percentage points by May of next year as Brazilian economic growth continues to slow and commodity prices stabilize, Tombini said.
Morgan Stanley on Monday slashed its forecast for Brazil’s key interest rate for the second time in less than a month, predicting the baseline Selic rate will end 2012 at 10.5%, down from the current 12%.
September 9, 2011
Alexander Ragir and Matthew Bristow – Bloomberg Businessweek, 09/09/2011
Rousseff (right) and Finance Minister Mantega Ed Ferreira/Agencia Estado/AP Photo
Investors suspect the central bank of caving in to political demands
Who sets interest rates in Brazil: Is it Central Bank President Alexandre Tombini or the country’s President, Dilma Rousseff? That question hung over financial markets after the Central Bank of Brazil cut the benchmark Selic interest rate by half a point, to 12 percent, on Aug. 31. The move was unexpected: The bank’s rate-setting committee had ratcheted up the Selic at its five previous meetings to combat inflation and had not signaled a change in its stance. Yet Rousseff in an Aug. 30 radio broadcast had said rates should begin to fall as the government curbs spending.
The abruptness of the shift in monetary policy left money managers such as Guilherme Figueiredo, director of M. Safra, a São Paulo investment firm, with the impression that Tombini had caved in to political pressure. “This is the worst possible decision our central bank could have made at such a moment,” Figueiredo says. “The loss of credibility is going to be large.” Rousseff’s press office declined to comment when asked about the rate decision.