Brazil interest rates

As Brazil’s monetary policy committee sits down in Brasília the consensus view is that it will attempt to regain some credibility in the fight against inflation and raise its policy interest rate by 50 basis points for a third consecutive time. That would bring its target overnight rate, the Selic, to 12.75 per cent a year. Even after discounting inflation of about 7.5 per cent, that is still a very hefty 5.25 per cent a year. So whatever the Copom announces on Wednesday evening after two days of deliberation – it will be either 50bp or 25bp – it will raise protests from labour unions and others worried about the impact of high interest rates on consumption and jobs.

But policy makers may well feel that, right now, inflation matters more. Read more

Unexpectedly early interest rate cuts in India, Peru and Egypt on Thursday indicate that falling oil prices and gathering disinflationary pressures are accelerating a cycle of monetary easing in many emerging market economies, analysts said on Friday.

The easing in key EM economies – added to expectations that several more countries will also cut rates – stands in stark contrast to a recent market consensus that 2015 would herald upward pressure on EM rates as the US Federal Reserve espoused a tighter policy, analysts said. Read more

As Alan Beattie wrote recently, a clear divergence in monetary policy is polarising the emerging market (EM) universe. Some countries, such as China last Friday, have cut interest rates to invigorate demand while others, such as Russia and Brazil, have had to hike rates to battle inflation.

The divide is growing starker, forming a basic template for EM investors. Softer oil and commodity prices are subduing inflation in most countries, creating room for easier monetary conditions. Other countries, however, are still struggling with ideosyncratic frailties, preventing them from capitalising on the ebbing EM prices. Read more

By Márcio Garcia of PUC Rio

Another R$30bn ($13.5bn) in long-term loans will be given this year by Brazil’s National Treasury to the BNDES, the government-owned National Bank for Economic and Social Development. These transfers are made at a highly subsidised interest rate, called the TJLP, currently 5 per cent a year, while the central bank’s base rate, the Selic, is currently at 11 per cent. The Treasury’s transfers to government-owned banks, initiated in 2008, currently amount to almost 10 per cent of GDP, of which R$414bn has gone to the BNDES. These resources are lent by the BNDES to corporations, also at subsidised rates.

Nonetheless, Brazil’s investment to GDP ratio remains anaemic. Read more

After months of speculation and the world’s longest tightening cycle, it looks like Brazil may finally be done increasing interest rates.

Late on Wednesday, the bank raised Brazil’s Selic rate another 25 basis points to 11 per cent – the highest level in more than two yearsRead more

Brazil’s economic growth continues to disappoint.

After data in December showed Brazil’s economy shrank in the third quarter of last year for the first time since 2009, the central bank’s IBC-Br index, a monthly proxy for gross domestic product, on Friday showed economic activity fell 0.3 per cent in November from a month earlier. Read more

Brazil’s central bank has increased its benchmark interest rate by 50 basis points to 10 per cent, as expected.

Here’s the accompanying statement:

Giving continuation to the adjustment of the benchmark interest rate, which began with the meeting in April 2013, the Copom (central bank’s monetary policy committee) decided unanimously to raise the Selic rate to 10 per cent a year, without bias.

 Read more

Well, it was fun while it lasted, but it seems that Brazil’s brief affair with low interest rates is over. The country’s central bank is widely expected to raise the benchmark Selic rate by 50 basis points to 10 per cent late on Wednesday, pushing it back into double digits for the first time since March of last year.

The move in itself is welcome — 12-month inflation in the month to mid-November came in at 5.78 per cent. That may be better than previous months, but it is still a long way off the country’s 4.5 per cent target.

However, Brazil’s monetary policy U-turn does raise several questions. Read more

Brazil’s central bank has increased its benchmark interest rate by 50 basis points to 9.5 per cent, as expectedRead more

All eyes are on the central bank in Brazil on Wednesday as the market counts down to the latest interest rate decision. But this time it’s not so important what policymakers say but how they say it. Read more

Have a look at the Brazilian central bank’s website and it’s very clear what the country’s inflation target is: 4.5 per cent.

Yes, the bank has a tolerance band of 2 percentage points in either direction in case of “external supply shocks” but the target is 4.5 per cent. It’s been 4.5 per cent for the past eight yearsRead more

No surprises there then. Brazil’s central bank voted on Wednesday to raise the country’s benchmark interest rate by 50 basis points to 8.5 per cent, as expected by analysts. Read more

Second-guessing Brazil’s central bank has been a little tricky recently. Market volatility and behind-the-scenes political pressure have made interest rate decisions somewhat of a mystery. But economists and traders are relatively confident of a 50 basis point interest rate hike later on Wednesday, it seems. Read more

Brazil sure does like to keep the market on its toes. After this morning’s disappointing first quarter GDP, the country’s central bank came out with another shocker on Wednesday night.

The central bank’s monetary policy committee increased the benchmark Selic rate by 50 basis points to 8 per cent. The market was expecting an increase of 25bps. Read more

Imagine being in the shoes of Brazil’s central bank president Alexandre Tombini (pictured) on Wednesday. Beyondbrics pictures the scenario as something like this:

Mr Tombini was sitting at his desk reading the newspapers this morning and thinking about tonight’s regular meeting of the monetary policy committee, known as Copom. “I think I will argue for a 50 basis point rise tonight. After all, inflation is hovering near the top of our admittedly already generous range of 4.5 per cent plus or minus 2 percentage points and it’s time to show that we mean business.” Read more

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. Read more

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. Read more

It was slightly better than expected. But not by enough. The latest measure of Brazil’s troubled economy will have left policy makers in a quandry.

The central bank’s monthly activity index contracted by 0.52 per cent in February, dashing any hopes that its 1.4 per cent expansion in January was the start of a sustained recovery. It comes after figures this week showed inflation rising above the government’s tolerated maximum – figures that might have strengthened the resolve of any hawks at the central bank keen to raise interest rates at its policy meeting next week. That now looks a harder trick to pull off. Read more

This month, the price of a standard car wash in São Paulo increased to R$32 from R$30 during the previous 12 months.

By coincidence, the increase matched almost exactly the level of inflation estimated for Brazil in February by the central bureau of statistics of 6.31 per cent year-on-year. Read more

Brazil’s central bank voted on Wednesday to keep the country’s benchmark interest rate steady at its all-time low of 7.25 per cent, as widely expected.

The accompanying statement from the central bank, however, was a little more mysterious than usual. Read more