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Montevideo, March 29th 2024 - 06:57 UTC

 

 

Poll shows deeper interest rates cuts expected from the Brazilian central bank

Wednesday, August 8th 2012 - 06:47 UTC
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This week’s July inflation announcement should help the Brazilian central bank decide  This week’s July inflation announcement should help the Brazilian central bank decide

Weak economic growth will likely prompt Brazil's central bank to cut interest rates deeper than previously expected this year, a weekly central bank survey of economists showed on Monday.

Forecasts for Brazil's benchmark overnight lending rate at the end of 2012 were down to 7.25% from 7.50%, one week earlier, according to the poll, which tracks weekly forecasts of the most widely watched indicators in Brazil.

Brazil's benchmark Selic rate is already at an all-time low of 8% after eight cuts since August 2011 as policymakers try to jump-start a stagnant economy.

The world's sixth-largest economy will grow only 1.85% this year, according to the survey, less than the forecast of 1.9% seen one week earlier. That would be the worst performance since a mild contraction in 2009 in the aftermath of the global credit crisis, and quite a distance from the 7.5% boom in 2010.

Meanwhile estimates for inflation in 2012 edged up to 5% from 4.98%, according to the survey. That is still within the central bank target of 4.5% plus or minus 2 percentage points.

The poll results are the median forecast of analysts polled by the central bank at about 100 financial institutions.

Consumer prices were seen rising 0.30% in July from the previous month, up from 0.26% seen a week earlier. The official CPI is expected to be released later this week.

In related news Brazil's broadest inflation index, the IGP-M, rose 1.34% percent in July, up from a 0.66% increase in June, the Getulio Vargas Foundation research group announced.

Analysts and investors closely monitor the IGP-M because it provides a broad look at wholesale and consumer prices in Brazil and also allows investors to watch price trends in the construction industry.

The IGP-M typically appears ahead of Brazil's benchmark IPCA consumer price inflation data for the same month. The government's statistics agency is due to release the IPCA for July on August 8.

The wholesale component of the IGP-M, which accounts for about 60% of the overall index, rose 1.81% in July, compared with an increase of 0.74% in the previous month.

The consumer price component, which has a 30% weighting in the index, rose 0.25%, compared with a 0.17% increase in June.

The construction costs index, which accounts for the rest of the IGP-M, climbed 0.85% in July after a rise of 1.31% in the previous month.

Consumer inflation in Brazil’s largest city Sao Paulo slow downed in July as food prices lost eased and apparel costs declined from the prior month. The IPC-FIPE index rose 0.13% in July compared with an increase of 0.23% in June, the University of Sao Paulo's FIPE economic research institute said last week.
 

Categories: Economy, Politics, Brazil.

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