Economists see Brazil economy extending contraction into 2016

Guillermo Parra-Bernal – Reuters, 08/17/2015

The Brazilian economy is expected to shrink next year, on top of a sharp contraction forecast for this year, according to a weekly central bank survey of economists published on Monday.

The median forecast of about 100 financial institutions projected a contraction of 0.15 percent in Brazil’s gross domestic product in 2016, down from stability in the prior week’s survey. Economists in the same survey expect the economy to shrink 2.01 percent this year, steeper than 1.97 percent the prior week.

The survey also showed a slight increase in inflation forecasts for 2016, to 5.44 percent, from 5.43 percent previously. Estimates for gains in consumer prices this year remained unchanged at 9.32 percent.

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Brazil Central Bank reiterates it is ready to keep current interest rate

Paulo Trevisani – The Wall Street Journal, 8/6/2015

Brazil’s central bank’s strategy to slow price increases is working, and the bank is ready to leave its benchmark interest rate at 14.25% while the inflation rate declines, according to the minutes from last week’s monetary policy meeting.

The bank reiterated in the minutes, published on Thursday, that risks for inflation this year are unfavorable, while repeating its pledge to drive inflation down to target by December 2016. It repeated that conditions for lower inflation next year have improved.

Inflation is forecast to end this year at 9.3%, according to a survey of economists made by the central bank. The forecast for the end of 2016 is 5.4%. The bank’s 12-month inflation target is 4.5%, with a two-point tolerance range in either direction.

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Brazil Central Bank Raises Benchmark Rate, Indicates Tightening to End

Paulo Trevisani – The Wall Street Journal, 7/29/2015

Brazil’s central bank raised its benchmark interest rate on Wednesday, but indicated it will be the last increase of the current, two-year, tightening cycle.

The bank raised the benchmark Selic rate to 14.25% from 13.75%, its 16th increase since April 2013. The decision was unanimous, though policy committee member Tony Volpon recused himself from the vote.

The bank said in an unusually explicit statement that leaving the Selic at its current level “for a sufficiently prolonged period is necessary for inflation to converge with the target at the end of 2016.”

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Brazil’s inflation slows in mid-July

Silvio Cascione – Reuters, 7/22/2015

Brazil’s inflation slowed in the month to mid-July as the economy headed into recession, potentially paving the way for a smaller interest rate hike by the central bank later this month.

Brazil’s IPCA-15 consumer price index rose 0.59 percent in the month to mid-July as expected by economists in a Reuters poll, down from 0.99 in the previous month, government statistics agency IBGE said on Wednesday.

Trailing 12-month inflation remained high at 9.25 percent,
more than double the official 4.5 percent target.

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Brazil monetary policy to remain vigilant on CPI target: Tombini

Filipe Pacheco – Bloomberg Business, 7/01/2015

Brazil’s Central Bank President Alexandre Tombini reiterated that policy makers are committed to the goal of bringing inflation to target at the end of next year.

Policy makers are seeing market expectations converge toward the center of the inflation target of 4.5 percent per year in the “mid- to long-term interval,” Tombini said at an event in Sao Paulo on Wednesday evening. “Our goal is to bring inflation to the center of the target at the end of 2016.”

He added that the central bank’s goal has been to prevent inflationary effects of “relative price realignment in the short term from being transmitted to a longer horizon.”

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Brazil Central Bank reaffirms commitment to reduce inflation

Rogerio Jelmayer – The Wall Street Journal, 6/29/2015

Brazil’s central bank president reaffirmed the country’s commitment to reduce inflation, despite negative impacts in economic activity in the short term.

Central bank head Alexandre Tombini said the monetary authority is committed to bring the country’s rampant inflation down to the official target by the end of next year.

“We are conducting a classic economic adjustment, which is necessary to reduce domestic and external vulnerabilities, put public debt back on a declining path and send inflation back to its target by the end of 2016,” Mr. Tombini said Sunday in a speech during the annual general meeting of the Bank for International Settlements, which took place in Basel, Switzerland.

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Real drops amid signs Brazil faces worst recession in 25 years

Paula Sambo – Bloomberg, 6/19/2015

The real fell the most among major currencies as Brazil braced for its worst recession in 25 years after the central bank reported that the economy contracted more than forecast in April.
Efforts by President Dilma Rousseff’s administration to reassure investors by increasing taxes and reducing expenditures are expected to damp the nation’s gross domestic product in the second quarter. Moreover, Brazil is the only nation in the Group of 20 to raise interest rates this year as inflation stays above target, further hampering growth prospects.
“It’s not a good picture,” Joao Paulo De Gracia Correa, a foreign-exchange superintendent at SLW Corretora de Valores, said in a telephone interview from Sao Paulo. “The economy is coming in even weaker than anticipated.”

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