Brazil’s Real Falls as Ukraine Turmoil Saps Emerging-Market Bid

July 29, 2014

Paula Sambo and Filipe Pacheco – Bloomberg Businessweek, 7/29/2014

Brazil’s real dropped the most among major Latin American currencies as turmoil in Ukraine dried up demand for emerging-market assets.

The real declined 0.2 percent to 2.2279 per U.S. dollar at 9:42 a.m. in Sao Paulo. Swap rates, a gauge of expectations for interest-rate moves, increased six basis points, or 0.06 percentage point, to 11.33 percent on the contract maturing in January 2017.

Investors sought refuge in the dollar as the European Union and the U.S. prepared new sanctions against Russia while President Vladimir Putin’s administration formulated its response to international pressure over the conflict in Ukraine.

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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 set to hold interest rates, signal long pause

July 16, 2014

Alonso Soto – Reuters, 7/16/2014

Brazil will likely keep interest rates steady for the second straight time on Wednesday and signal it will leave them there for some time even after inflation hit the ceiling of its target range.

At its last meeting on May 28, the central bank’s monetary policy committee halted its year-long rate-hiking campaign and held its benchmark Selic rate at 11 percent to give a respite to an economy that is again flirting with recession.

Disappointing growth data will likely keep the central bank, led by Alexandre Tombini, from raising interest rates for the rest of 2014 even though inflation is expected to stay high for the next two years.

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Brazil Central Bank puts inflation at center of concerns

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.”

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Brazil central bank cuts growth lower inflation

December 20, 2012

Silvio Cascione, Luciana Otoni – Reuters, 12/20/2012

Brazil’s central bank acknowledged on Thursday that the economy will grow very little in 2012 and reinforced the case for a long period of low interest rates by forecasting that inflation should ease next year.

The bank lowered its 2012 economic growth forecast to 1.0 percent from 1.6 percent previously, matching market estimates, according to its latest quarterly inflation report.

The bank also lowered its 2013 inflation forecast to 4.8 percent from 4.9 percent previously, contrasting with market forecasts projecting inflation at 5.42 percent.

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Brazil swap rates drop on Rousseff comment; real little changed

December 12, 2012

Blake Schmidt – Bloomberg, 12/12/12

Brazil’s swap rates fell for the first time in four days as comments from President Dilma Rousseff encouraged speculation that policy makers will keep borrowing costs at record lows through the first half of 2013.

Interest rates are on track to converge with international levels, Rousseff said in a meeting with business leaders in Paris, adding that Brazil needs to reduce the cost of capital.

Swap rates on the contract due in January 2016 decreased six basis points, or 0.06 percentage point, to 8.16 percent at 1:29 p.m. in Sao Paulo. The real was little changed at 2.0805 after closing on Dec. 7 at 2.0751, the strongest since Nov. 14.

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Brazil’s central bank will raise rates next year, if needed – source

September 18, 2012

Luciana Magalhaes – The Wall Street Journal, 09/18/2012

Brazil’s central bank doesn’t rule out raising its baseline interest rate in 2013 if necessary, to keep inflation within its target range, a person close to the central bank said Tuesday.

“We have an inflation targeting policy. If it becomes necessary, the central bank will raise rates in 2013 to keep the inflation in the target,” said the person, who asked not to be named.

While Brazil’s central bank has most recently been cutting interest rates, many market players are betting that the central bank will have to raise rates in 2013 to tame inflation. But top finance ministry officials have sought to play down any need for rate hikes next year.

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The China Temptation

August 10, 2012

Jaime Daremblum – Hudson Institute, 8/10/2012

What a difference a year makes.

In August 2011, as the European debt crisis raised fears of another international financial panic, Brazilian officials were bragging about their country’s impressive economic strength and record-low unemployment rate. “This is the second time that a crisis affects the world,” said President Dilma Rousseff, “and it is the second time that Brazil doesn’t shake.” The perception of Brazil as a booming economy that was insulated from the global turmoil had prompted an influx of foreign businessmen hoping to get rich (or richer). “If the rest of the world is cratering,” a Rio-based American banker told the New York Times, “this is a good place to be.”

In August 2012, amid a slowdown in China and other developing countries, Brazil is teetering on the brink of recession, largely because of an overvalued currency and sluggish exports. Its economy barely grew at all (0.2 percent) in the first quarter of this year, and its persistent weaknesses have suddenly been magnified. Even the Brazilian services sector, which had been buoying the economy, is now slumping: Its activity index (as measured by the financial giant HSBC) hit a three-year low in July. As for Brazilian industrial production (approximately one-third of the national economy), it has “failed to respond to government stimulus measures and a series of aggressive interest rate cuts,” notes the Wall Street Journal. Writing in the Miami Herald last week, Latin America expert Susan Kaufman Purcell declared that “Brazil’s economic future does not look nearly as bright as its recent past.” Indeed, while unemployment remains relatively low (for now), Brazil is no longer seen as an unstoppable economic powerhouse.

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Brazil swap rates at highest in almost week on faster inflation

August 7, 2012

Josue Leonel, Gabrielle Coppola – Bloomberg Business Week, 08/06/2012

Brazilian swap rates rose to the highest level in almost a week as a report showed inflation is picking up, reducing speculation the central bank will sustain the pace of cuts in borrowing costs.

Swap rates on the contract due in January 2014 increased one basis point, or 0.01 percentage point, 7.79 percent today in Sao Paulo, the highest level on a closing basis since July 31. The real fell 0.1 percent to 2.0311 per U.S. dollar.

Inflation as measured by the IGP-DI index accelerated in July to 1.52 percent from 0.69 percent in the prior month, the Getulio Vargas Foundation reported today. The median forecast in a Bloomberg survey was for 1.46 percent inflation.

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Brazil’s Tombini proposes new post to improve transparency

June 1, 2012

Adriana Brasileiro and Andre SolianiBloomberg, 05/31/2012

Brazil’s central bank created a post on its board to improve transparency and communications two weeks after President Alexandre Tombini said it’s increasingly important for central banks to provide “forward guidance” to the market.

Tombini recommended that President Dilma Rousseff approve Luiz Edson Feltrim, currently executive-secretary, as the institution’s special affairs director, according to an e-mailed statement from the central bank yesterday. In a speech on May 10 in Rio de Janeiro, Tombini said transparency is key for the central bank given the “exceptionally complex moment for the global economy.”

“There is an ongoing trend in the world for more transparency at central banks,” Roberto Padovani, chief economist at Votorantim Ctvm Ltda, said in a phone interview yesterday. “Communication is becoming an important tool for monetary policy.”

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