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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Emerging Markets-Brazil interest rates rally on central banker’s remark

Walter Brandimarte – Reuters, 6/17/2015

Yields paid on Brazil’s interest rate contracts rallied on Wednesday after a central bank director said recent progress in inflation expectations was “not good enough,” while Latin American currencies weakened slightly ahead of a U.S. monetary policy statement.
Brazil’s interest rate futures for January 2017 rallied 8 basis points to 14.04 percent as comments from central bank director Tony Volpon led investors to bet rates would remain high for longer than expected next year.
In a meeting with investors in London, Volpon acknowledged a recent improvement in inflation expectations for 2016 but suggested more must be done to meet the government’s target of 4.5 percent.

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Amid Brazil’s economic crisis, consumers struggle with debt

Jenny Barchfield – ABC News, 6/15/2015

Francisco Xavier emerges from a payday loan shop, his brow more furrowed with worry than when he entered. His loan request was denied, and he has no idea how he is going to pay out-of-control bills, including credit card payments that gobble up nearly half his monthly income.

Xavier, a taxi driver, is among the rapidly burgeoning ranks of “super debtors” — people who rose into the middle class during Brazil’s nearly decade-long boom, but now find themselves drowning in debt as Latin America’s largest economy stalls, causing inflation to heat up and unemployment to rise.

Brazil’s top credit information bureaus estimate that as of April, more than 55 million Brazilians were behind on paying off credit cards or loans. That’s 37 percent of the adult population in a country of about 200 million people, and the numbers are rising. According to the SPC credit information bureau, the lists have grown by an estimated 700,000 people since January, when the top credit bureaus began working together on combined lists for the first time.

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Brazil analysts raise 2015 inflation forecast after May surprise

David Biller – Bloomberg, 6/15/2015

Brazil economists raised their 2015 inflation forecast by more than a quarter-point and lowered their outlook for economic activity as the central bank raises borrowing costs.

Analysts boosted their forecast for inflation to 8.79 percent from 8.46 percent, according to the June 12 central bank survey of about 100 analysts published Monday. The central bank’s top five forecasters increased their forecast to 8.9 percent from 8.47 percent.

Brazil is the only central bank among the Group of 20 nations raising interest rates as above-target inflation erodes consumer and business confidence. Economists in the survey estimate gross domestic product will contract 1.35 percent this year before expanding 0.9 percent in 2016.

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Brazil Real advances after Rousseff backs spending cut measures

Filipe Pacheco – Bloomberg Business, 06/08/2015

Brazil’s real appreciated the most among Latin American currencies after President Dilma Rousseff said measures to shore up the budget need to be strong enough to boost growth.

Criticism of Finance Minister Joaquim Levy for pursuing tax increases and spending cuts is unfair, Rousseff said in an interview published by O Estado de S.Paulo newspaper Monday. Levy has vowed to improve Brazil’s fiscal accounts after the worst budget deficit on record. He has increased taxes and frozen 69.9 billion reais ($22.2 billion) of this year’s budget.

“It is important for the market to see Rousseff defending him,” Jefferson Rugik, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in telephone interview. “She’s being vocal in her attempts to seek confidence in her administration.”

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Brazil treads fine line between inflation and contraction

Joe Leahy – Financial Times, 06/08/2015

South America’s largest economy faces a difficult balancing act to avoid a potentially disastrous spiral of economic contraction as it seeks to control inflation.

Brazil’s planning minister Nelson Barbosa warned that he expected only a very gradual recovery from this year’s recession, in contrast with previous downturns during the past decade when the country immediately bounced back with rapid growth.

However, Mr Barbosa added that growth should still be enough for Brazil to avoid slipping into a situation in which interest rate increases to control inflation combined with an austerity programme to reduce the budget deficit only deepened the recession.

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