May 8, 2013
Kenneth Rapoza – Forbes, 5/8/2013
Declining food prices helped Brazil’s monthly inflation index fall from 6.59% to 6.49%. It’s not great, but it’s heading in the right direction.
Food inflation services have been the main culprit behind inflation this year, but in April it was health and personal care groups that came in stronger than forecast, printing at 0.96% on the month for healthcare and 1.3% for personal care products. Brazilians love their Nivea and Boticario. The good news is that daily inflation surveys are suggesting that food inflation is moving down at an even faster pace, which means 6.49% won’t be topped in May.
“We see downside risks to inflation for May,” said Guilherme Loureiro, an analyst at Barclays Capital in São Paulo. He said in a note to clients on Wednesday that a temporary downtrend in domestic inflation plus renewed concerns about the global growth outlook, Barclays is still holding out for a 25 basis point rate hike in Brazil to 8.25%. That’ll happen mid-month if their analysis is right.
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.
April 17, 2013
Luis Barrucho – BBC News, 04/17/2013
The city of Sao Paulo has a large Italian population and is proud of its Italian restaurants. So it came as a shock when some of them announced that any dish with a tomato base would be dropped from the menu.
This startling change to such a traditional offering came after tomato prices soared over the past 12 months in Brazil, at one point recording an increase of around 150%, according to the IBGE, Brazil’s statistics agency.
And the impact went far beyond restaurant tables as pressure grew on the government to curb rising inflation, an issue that is deeply sensitive in South America’s largest country.
April 9, 2013
Joshua Goodman & Denyse Godoy – Bloomberg, 0/09/2013
One of Sao Paulo’s most traditional Italian restaurants is urging its clients to forgo the tomato to protest what it considers President Dilma Rousseff’s policy of promoting growth at the expense of higher inflation.
Augusto Mello, owner Nello’s Cantina, last month began curtailing his tomato purchases to protest a tripling in prices for the vegetable over the past year to 150 reais ($75) for a 20-kilogram crate. A sign on the entrance of the 38-year-old restaurant urges patrons to become “conscientious consumers” and help fight inflation by ordering dishes without red sauce.
The one-man crusade may be touching a nerve with consumers, whose pockets are being squeezed by surging prices for food and services. A report tomorrow will show that inflation breached the 6.5 percent limit of the government’s target range in March for the first time in 16 months, according to a Bloomberg survey of economists, even as the economy struggles to regain its footing after its second-worst performance in 13 years in 2012.
March 28, 2013
Alonso Soto & Asher Levine, 03/28/2013
Brazil’s central bank said on Thursday it expects inflation to remain relatively high in the next two years, raising its forecasts closer to the ceiling of the official target range, but it stopped short of signaling an imminent rate increase.
The bank’s quarterly inflation report confirmed market expectations that inflation is quickening despite slower growth in Latin America’s largest economy, a political liability for President Dilma Rousseff who must campaign for re-election next year.
Inflation hovering well above the center of the official annual target range of 4.5 percent, plus or minus two percentage points, has raises pressure on Brazilian policymakers to curb price pressures soon.
March 27, 2013
Brazil’s President Dilma Rousseff on Wednesday said she will not support policies that attempt to curb inflation by lowering economic growth.
“I don’t agree to policies to fight inflation that look into reducing economic growth,” Rousseff said in comments to reporters in South Africa, where she is attending a meeting of BRICS countries, broadcast by Brazilian government TV.
“Last year we had low economic growth, but inflation rose because we had a supply shock,” she added, repeating one of the arguments recently used by the central bank to justify keeping Brazil’s base Selic rate at an all-time low of 7.25 percent even as inflation neared the ceiling of a government target.
March 25, 2013
Matthew Malinowski – Bloomberg, 03/25/2013
Analysts covering Brazil’s economy raised their forecast for the benchmark rate at year-end, as policy makers seek to control accelerating annualized inflation in the world’s second-biggest emerging market.
Brazil’s Selic rate will be 8.50 percent at the end of this year, according to the median estimate in a central bank survey of about 100 analysts published today. Analysts had forecast 8.25 percent the previous week. The rate will be 8.50 percent at year-end 2014, the survey showed.
Brazil’s economy has reacted slowly to stimulus aimed at spurring the slowest growth among major emerging markets while cooling inflation. After gross domestic product grew by 0.9 percent last year, measures including tax cuts and record-low interest rates have helped drive recent retail sales and industrial output above forecasts. Brazil may require additional measures to slow inflation levels approaching the upper limit of the central bank’s target range, bank President Alexandre Tombini said on March 22.
March 15, 2013
Joshua Goodman – Bloomberg, 03/15/2013
Brazil should refrain from raising interest rates if President Dilma Rousseff hopes to win a “tug of war” with banks and spur faster growth, the architect of the country’s economic miracle in the early 1970s said.
Antonio Delfim Netto was finance chief when Brazil’s dictatorship jailed the then-Marxist activist Rousseff in 1970. Now, as a consultant and columnist he’s an often solitary voice praising her government’s cutting of rates to a record and use of capital controls to weaken the real.
Delfim Netto’s views run contrary to that of economists from Itau Unibanco Holdings SA, the nation’s largest bank, and JPMorgan Chase & Co., who say Rousseff’s policies on rates and the currency have been stoking inflation above the 4.5 percent target since 2010. Rousseff is on the right track and should stay the course, defying rate-swap traders who expect the central bank to raise interest rates 150 basis points by year-end, he said.
March 14, 2013
Joseph Ciolli & Ye Xie – Bloomberg, 03/14/2013
Efforts by Brazil to tame inflation are providing foreign-exchange traders with the biggest returns in the world by purchasing reais with funds borrowed in dollars.
Investing in real forward contracts funded by the greenback has gained 5.3 percent this year, the most of any of the 44 other currencies tracked by Bloomberg. Wagers that Brazil’s currency will rise outpaced those expecting a decline by an average of $5.6 billion this year, data from the Sao Paulo-based BM&F exchange and compiled by Bloomberg show. As recently as September there were net bets against the real.
Finance Minister Guido Mantega, who popularized the term “currency war” in 2010, told Bloomberg News last month he’s abandoning the strategy that drove the real down 19 percent in two years as the government shifts its focus to containing inflation. The central bank signaled on March 6 that it’s ready to raise interest rates from a record low 7.25 percent after dropping a pledge to hold borrowing costs steady for what it had called “a prolonged period of time.”
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.”