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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UPDATE 1-Brazil 2015 budget gap hits record as austerity fails

Alonso Soto – Reuters, 01/29/2016

Jan 29 Brazil’s overall budget deficit soared to a record 613 billion reais ($150.99 billion) in 2015, central bank data showed on Friday, nearly doubling from last year as efforts to rebalance fiscal accounts failed and interest rates shot up.

The budget deficit equaled 10.34 percent of the gross domestic product, nearly five times its shortfall in the 12 months to mid-2011. The deficit mushroomed under President Dilma Rousseff, who took office at the start of 2011.

In comparison, at the height of its debt crisis in 2009 Greece had a deficit of 15.2 percent of GDP.

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Real takes a reality check as Brazil strains to support its currency

Katie Martin – Financial Times, 10/4/2015

Brazil’s currency, the real, is tormenting many fund managers.  Few thought it would see out the year unscathed. The country’s high interest rates were never likely to be enough entirely to shield the currency from trading weakness at a time when the economy was shrinking and the US is on the cusp of raising interest rates.

But the real has contrived to stand out particularly among a field of emerging markets currencies almost all of which have suffered bruising declines.

The pace and scale of the fall in the Brazilian currency, once a popular pick as one of emerging markets’ juiciest bets, have stumped even the most seasoned observer and left some investors peeking at their screens through their fingers. “Mayhem” is how Rabobank described it; the source of “one of the wildest days we’ve ever seen in Latin American markets”.

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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 analysts boost 2016 benchmark rate call for second week

David Biller – Bloomberg Business, 7/13/2015

Brazil analysts raised their 2016 forecast for the benchmark Selic rate as the central bank vows to slow inflation to target by the end of next year.

Analysts increased their forecast for the Selic rate at end-2016 to 12.25 percent from 12.06 percent the prior week, according to the July 10 central bank survey of about 100 analysts published Monday. That’s the second straight increase of analysts’ median forecast. They also reduced their 2016 inflation prediction for the second time, to 5.44 percent from 5.45 percent.

Brazil’s inflation is running at almost double the target as the government raises regulated prices and a weaker currency fuels the price of imports. The central bank, which raised the key rate in the past six meetings, will continue to lift borrowing costs even as the economy heads to its deepest recession in 25 years.

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Brazil’s inflation rate to reach 9.12 pct in 2015

Silvio Cascione – Reuters, 7/13/2015

Economists raised their forecasts for Brazil’s end-2015 inflation rate but lowered their estimates for price increases next year, a weekly central bank survey showed on Monday.

The median forecast of about 100 financial institutions in
the poll also showed an increase in expectations for benchmark
interest rates next year.

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Brazil analysts boost interest-rate forecast to nine-year high

David Biller – Bloomberg Business, 06/01/2015

Economists raised their forecast for Brazil’s key interest rate to the highest since 2006 as they expect policy makers to continue boosting borrowing costs after this week’s meeting.

Analysts changed their forecast for the year-end benchmark rate to 14 percent from 13.75 percent, according to the May 29 central bank survey of about 100 analysts published Monday. They also increased their outlook for 2015 consumer-price increases to 8.39 percent from 8.37 percent the prior week.

Above-target inflation is forcing Brazil’s central bank to raise interest rates even as the economy heads toward recession. Analysts in Monday’s survey forecast gross domestic product will shrink 1.27 percent this year, which would be the worst performance since 1990.

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