Brazil struggles with inflation, and expectations

Paulo Travisani – The Wall Street Journal, 7/26/2015

Brazil’s version of the Federal Reserve will almost certainly raise its benchmark Selic interest rate next week for the 16th time in just over two years in a bid to fight escalating inflation.

Trouble is, prices aren’t cooperating. Brazil’s annual inflation rate recently hit 9.25%. That is more than double the official 4.5% target and up substantially from 6.5% in April 2013, when the bank started raising rates.

That double-whammy of high rates and inflation are weighing on Latin America’s largest economy, which is contracting this year.

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Brazil retail sales shine light on economy’s decline

JONATHAN WHEATLEY, FINANCIAL TIMES – 7/15/2015  

Another day, another disastrous data point from Brazil. The national statistics office revealed on Tuesday that retail sales fell a seasonally adjusted 0.9 per cent in May from April and by (an unadjusted) 4.5 per cent year on year.

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The figures were much worse than expected. A Bloomberg survey had predicted a 0.3 per cent month-on-month contraction in the headline figure. A look into the detail shows the extent to which Brazil’s consumer credit-driven growth model has collapsed.

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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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Brazil federal tax revenues down 4 pct in May vs year ago

Silvio Cascione – Reuters, 6/25/2015

Brazil’s federal tax revenues fell in May despite this year’s battery of tax hikes, the country’s tax agency said on Thursday, adding to signs of a recession and complicating government efforts to plug a budget gap.

Brazil’s federal government collected 91.5 billion reais ($29.6 billion) in taxes in May, down 4 percent from the same month a year ago when discounted for inflation.

Economists expected May tax revenues to total 94 billion reais, according to the median forecast in a Reuters poll of 12 economists. The country collected 109 billion reais in federal taxes in April, according to the agency.

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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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Auto sales plummet in Brazil, hamstringing key industry

Stan Lehman – The San Diego Union-Tribune, 6/15/2015

Plummeting auto sales in Brazil amid the nation’s worst economic crisis in a decade have battered the industry that makes up one-fourth of the country’s industrial gross domestic product and has led to widespread layoffs and mandatory leaves.

At least 6,000 workers in auto factories have been laid off since January, officials say, and another 20,000 put on furlough. Those add to thousands of jobs lost last year.

Additionally, Fenabrave, an association of auto dealers, said 250 of the country’s 8,000 dealerships have gone out of business this year, resulting in 12,000 lost jobs.

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