Brazil’s New Central Bank Chief Takes Post With a Pledge to Pursue Lower Inflation

Paulo Trevisani – The Wall Street Journal, 06/13/2016

BRASÍLIA—Brazil’s central bank Monday inaugurated a new leader to deal with an old challenge: taming stubborn inflation amid a shaky economy and political chaos.

Private-sector economist Ilan Goldfajn took over the post from Alexandre Tombini in an hour-long ceremony at the bank’s imposing building here. An appointee of Brazil’s suspended President Dilma Rousseff, Mr. Tombini had held the job since January 2011. On his watch, Brazil never met its 4.5% annual inflation target, as the figure stayed significantly above that level even as the economy ground to a halt in the past few years.

Mr. Goldfajn, 50 years old, was appointed by acting President Michel Temer, who will serve out Ms. Rousseff’s term if she is ousted. Mr. Goldfajn—a U.S.-educated economist who for the past decade led the economic-research department at Itaú Unibanco, Brazil’s largest private-sector bank—has pledged to meet the nation’s inflation target, without giving a time frame, even as prices are rising at a 9.3% pace, as of May.

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No Rate Cuts In Brazil Until October, Maybe

Kenneth Rapoza – Forbes, 06/09/2016

Brazil’s Central Bank kept interest rates at 14.25% on Wednesday after market hours as expected, citing inflation concerns. No one expected a surprise cut anyway, as the Bank is now undergoing a leadership shift. Alexandre Tombini is out. Itau economist Ilan Goldfajn is now in. Wednesday marked the last time Tombini will take part in a monetary policy committee meeting as Bank governor.

For now, investors shouldn’t expect a rate decline until October at the earliest, says Nomura Securites analyst Joao Ribeiro.  The iShares MSCI MSCI +% Brazil (EWZ) sold off by 1.4% after market on the news.

A copy and paste statement from the Bank reads: “The committee recognizes the advances in the policy to combat inflation, especially the containment of the second order effects of the adjustments in relative prices. However, the committee considers that the high level of 12-month inflation and inflation expectations that are distant from the objectives of the target regime, do not offer space for easing of monetary policy.”

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Brazil’s inflation accelerates above all forecasts in April

David Biller – Bloomberg, 05/06/2016

Brazil’s consumer inflation accelerated more than all analysts forecast in April, pushing the market to temper bets the central bank will lower interest rates.

The benchmark IPCA consumer price index climbed 0.61 percent after a 0.43 percent rise the previous month. That was more than the median forecast for a 0.54 percent increase from 44 economists surveyed by Bloomberg. Twelve-month inflation slowed to 9.28 percent.

Annual inflation at more than double the official target has hurt the confidence of Brazilians whose salaries don’t stretch as far as they once did. Making matters worse, the nation is confronting double-digit unemployment and the prospect of a second year of recession. Many believe the scope of the downturn will provide the central bank room to lower its benchmark interest rate from a near 10-year high.

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Brazil’s labor market is imploding

Kenneth Rapoza – Forbes, 02/19/2016

Once China-like, Brazil’s labor market is starting to look old school Brazilian.

Maybe it was three years ago now when Latin America guru Tony Volpon of Nomura Securities in New York said over and over again in his Brazil reports that his country’s red hot labor market had no legs. China demand was slowing. Interest rates were rising. Investment was heading to the QE capitals of the world — U.S. and Europe. Volpon, now a technocrat at Brazil’s Central Bank, didn’t know how prescient he was at the time. Once the twin Petrobras bribery and money laundering scandals hit, all hell broke loose.

The big construction and engineering firms that tag-teamed with the oil giant and members of Congress to bilk billions from shareholders and public employees were rounded up like cattle. One by one, the captains of Brazilian industry were locked up. Their companies lost lucrative government contracts to build refineries and make marine vessels. Their employees lost their jobs.

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Brazil’s real extends slide despite intervention

 Asher Levine and Bruno Federowsk – Reuters, 9/29/2015

Brazil’s real extended its decline into a third session on Tuesday as traders, concerned about the outlook for commodities prices and local growth, shrugged off the central bank’s efforts to boost the battered currency.

Other currencies in the region were little changed, while stocks moved slightly higher. The real strengthened at the open following the central bank’s announcement after Monday’s close that it would sell up to $2 billion in the spot market on Tuesday with repurchase agreements and hold an unscheduled currency swap auction. Still, the real remained near its weakest level on record,
hovering near 4.13 per dollar.

“It seems that the Brazilian currency market is nolonger accepting ‘more of the same’ when it comes to central bank auctions and is testing the bank for something stronger,” Jefferson Luiz Rugik, a trader with Brazilian brokerage Correparti, wrote in a client note.

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Brazil stock traders recoil at Volpon’s rate call as real climbs

Denyse Godoy, Paula Sambo, and Filipe Pacheco – Bloomberg Business, 7/21/2015

Brazilian shares dropped to an almost four-month low on speculation borrowing costs at Latin America’s largest economy will increase further, curbing prospects for equities. The real advanced for the first time in four days.

The Ibovespa extended this month’s slump after central bank director Tony Volpon said policy makers should keep raising interest rates until the outlook for inflation reaches the government’s target. The benchmark stock gauge has tumbled 11 percent from this year’s peak on concern the decision to boost the Selic to a six-year high to tame consumer prices will deepen an economic contraction.

“The central bank will probably increase rates again next week in a trend that’s damaging the economy and prospects for companies,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said by phone from Sao Paulo.

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Brazil economy still faltering, with GDP contraction on par with Russia’s

Kenneth Rapoza – Forbes, 6/19/2015

Brazil’s economy is grinding to the bottom. But the bottom doesn’t appear to have been hit just yet.

The monthly GDP proxy at the Central Bank of Brazil, known as the IBC-Br index, surprised on the downside on Friday by falling 0.84% in April. That’s from a downwardly revised -1.51% decline in the previous month and is now compatible with a yearly drop of 3.13%.

Putting this into perspective, Brazil’s BRIC counterpart Russia is expected to contract 3.25% this year and its economy is facing weaker oil prices and sanctions against its oil and finance companies. Brazil is moving in line with a sanctioned economy that is over dependent on one commodity, while Brazil has good relations with the world and a much more diverse economy.

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