Brazil’s central bank is in tightening mode again, raising its policy interest rate last week after a long cycle of loosening that began in August 2011. It is worried that inflation is on the rise and less worried, apparently, about slow growth.
But behind recent numbers on inflation is another set of numbers on retail sales, which fell in February for the first time in a decade. If that turns into a trend, the very foundations of Brazil’s recent growth story will be undermined. Chart of the week takes a look. Continue reading »
Brazil’s central bank ended an easing cycle that last nearly two years by raising its benchmark lending rate on Wednesday night to tackle rising inflation.
The central bank’s monetary policy committee increased the benchmark Selic rate by 25 basis points. Continue reading »
“Federal Police tried to arrest drug traffickers smuggling narcotics under 500 kilos of tomatoes. The drug dealers fled, leaving behind the cocaine and taking all the tomatoes,” says a spoof news report circulating on the internet in Brazil.
Anyone who enters in a grocery store in the country will get the joke. The official IPCA-consumer price index registered a rise of 106 per cent in the price of tomatoes in the last 12 months. According to newspaper Folha de S.Paulo, however, the increase is in fact much greater in the nation’s financial capital, from R$3 per kilogramme to more than R$9 during the same period. Continue reading »
Brazilians often say they can organize a party like no one else. And there is some truth in it, just take a look at carnival, the biggest street party in the world. Millions of people get together in cities all over the country without invitation or advertisement. They dance, have fun, get drunk and go home… or back to their hotels, that is, if they were fortunate enough to find one. Continue reading »
Last Christmas, you could not have moved on Rua Vinte Cinco de Março, the busy market street in São Paulo, so crowded was it with festive season shoppers. Indeed, it seemed all of Brazil was out shopping last year.
So it may come as a surprise then that retail sales in Brazil in December were below expectations. Instead of the monthly increase of 0.8 per cent forecast by the market compared with November, retail sales rose only 0.5 per cent. Continue reading »
What? Hulk no smash currency appreciation?
Just as other countries look like they are relaunching the global currency war – see Japan – it seems like Brazil may be tiring of its long-fought and ultimately unrewarding campaign.
After some inconsistent statements, Brazil’s finance minister, Guido Mantega, signalled on Friday that the government’s attention was swinging back to inflation. Continue reading »
Is inflation getting out of control in Brazil? The national statistics office said on Thursday that consumer prices rose by 0.86 per cent in January, bringing the annual rate to 6.15 per cent. That’s up from 5.84 per cent in December and heading closer to the upper limit of the government’s tolerance range of 6.5 per cent, two percentage points above its inflation target.
The target, it seems, has been forgotten. And if industrial production figures out this week are any guide, it is unlikely to be remembered any time soon. Continue reading »
Well, they thought it was going to be bad. But not this bad. Consumer price inflation in Brazil was 0.88 per cent in the month to mid-January and 6.02 per cent over the previous 12 months, the IBGE, the national statistics institute, said on Wednesday.
On Monday, the central bank’s weekly survey of market economists showed inflation expectations were creeping up: the consensus for January had risen to 0.81 per cent from 0.78 per cent a week earlier. But Wednesday’s figure was off the chart. Continue reading »
Was this what the central bank expected? Last Wednesday, Brazil’s monetary policy makers held their benchmark interest rate steady on the grounds that its current level (7.25 per cent a year) was the right one to keep inflation on a downward course.
On Monday, market economists surveyed by the bank showed what they thought of that: inflation expectations for 2013 are up, from an average of 5.53 per cent last week to 5.65 per cent today. Continue reading »
We all know about the backlash against the corporate chief executives who try to award themselves extravagant pay raises even after delivering rubbish financial results.
But what about employees of central banks who want pay raises to compensate for inflation even though they are meant to be the very people responsible for curbing price hikes?
That may sound strange but that is what is happening in Brazil. Continue reading »
Alexandre Tombini must be laughing all the way to the (central) bank.
The decision of Brazil’s central bank to start hacking away at interest rates back in August last year seemed a little mad at the time. At that point, none of the other major emerging markets were embarking on such dramatic easing cycles and the economic data did not seem to justify the dovish policy.
However, with the worsening of the international scenario since, Tombini has been proved either right or very lucky. Further justification for the current easing cycle came in the form of June’s inflation data on Friday, which showed the monthly rate had fallen to the lowest level since August 2010. Continue reading »
A ray of sunshine in the midst of Brazil’s downpour of negative data: inflation, which was running at 6.5 per cent at the end of last year, has fallen below 5 per cent a year for the first time since September 2010, the national statistics agency said on Wednesday.
The figure was lower than expected by all but one of 33 economists surveyed by Bloomberg. It is, nevertheless, not much of a silver lining to a large and glowering raincloud: slower growth. Continue reading »
Brazil’s President Rousseff made history on Thursday evening when she announced that she was partially dismantling yet another legacy of the country’s former inflation-led economy.
The poupança, the popular government-guaranteed savings accounts that have rewarded holders with a minimum of about 6 per cent since they were created in the 19th century, will no longer be as rigid in their returns. Continue reading »
This was meant to be the worst day of Alexandre Tombini’s career.
Most economists had been betting that Brazil’s 2011 annual inflation would come in above the official target range of 4.5 per cent, plus or minus two percentage points. It would have been the first time a central bank president had failed to keep consumer price rises within target since 2003. Tombini was in trouble and it was just a matter of waiting for Friday’s IPCA data to confirm the bad news.
But it never happened. To general surprise, annual inflation in December came in at exactly 6.5 per cent – the highest in seven years but just within target. Continue reading »
The Brazilian real has greeted last week’s European summit deal with about as much enthusiasm as a child being forced to eat Brussels sprouts.
The Brazilian currency lost 2.5 per cent of its value against the dollar to hit a two-week low of 1.8440 on Monday, amid concern over a weaker outlook for commodity prices. Continue reading »