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COUNTRY INSIGHTS

Slow Recovery of Industrial Production and Investments
BRAZIL ECONOMICS · Report · 06 Nov 2017

The data for September confirm that industrial output is still recovering, but at a slow pace. Although production of capital goods dipped after having expanded for five straight months, the growth of capital goods imports will lead to an increase in gross fixed capital formation. All the same, w...

The End of the Easing Cycle and the SELIC in 2018
BRAZIL ECONOMICS · Report · 30 Oct 2017

As expected, the Central Bank cut the interest rate from 8.25% to 7.50% and clearly signaled the intention to lower it to 7.0% at the last COPOM meeting of 2017. There remains the doubt about a final cut of 25 points at the start of 2018, which will be determined by the upcoming data. But our est...

What Do Economists and the Yield Curve Have to Say About the SELIC Rate?
BRAZIL ECONOMICS · Report · 23 Oct 2017

A broad consensus exists among economists about the future of monetary policy: the SELIC rate will fall to 7% in December (with an outside chance of one or two more cuts of 25 points) and stay at that level throughout 2018. But the picture painted by the yield curve is very different, “pricing in...

The Indications from the Financial Stability Report
BRAZIL ECONOMICS · Report · 23 Oct 2017

Recognition is practically unanimous in the financial market that the Brazilian economy has turned the corner and is now recovering, driven mainly by household consumption, in turn stimulated by the decline of the real interest rate and expansion of credit to households. However, even assuming a ...

Retail Sales
BRAZIL ECONOMICS · Report · 16 Oct 2017

Household consumption continues to be the driving force of the current recovery, and as is logical, its tendency is closely accompanied by real retail sales. In August, however, real retail sales in the restricted sense dipped slightly. We believe this movement is temporary and does not change th...

Leverage, Debt Service and Increased Consumption
BRAZIL ECONOMICS · Report · 16 Oct 2017

On the aggregate demand side, the driving force of the economy is the expansion of household consumption, which is being strongly stimulated by monetary policy, in particular the persistently low market real interest rate. That stimulus comes not only from the preference for present over future c...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 09 Oct 2017 · 4 responses

Ready to see the second denunciation submitted by Janot considered by the Chamber of Deputies, which should reject it, and suffering from the lowest approval ratings since the Sarney administration, President Michel Temer, with his political burden, has become an important obstacle to the continu...

Fiscal Policy Victories and Frustrations
BRAZIL ECONOMICS · Report · 09 Oct 2017

​The economic team has been unquestionably racking up victories on the fiscal front, among them changes in the design of the student loan program (Fies); alteration of the system of setting the interest rates charged by the BNDES, which will eliminate implicit subsidies; and measures to combat fr...

The Engine of Recovery – Household Consumption
BRAZIL ECONOMICS · Report · 02 Oct 2017

Evidence that household consumption is the predominant force in Brazil’s economic recovery is building up to an ever more solid scenario. However, doubts exist about the intensity of this movement. The decline of the market real interest rate and improvement in the job market and credit supply ar...

Economic Outlook
BRAZIL ECONOMICS · Presentation · 26 Sep 2017

A benign international scenario is favoring Brazil, inflation is falling across the board, and there is a clear increase in consumption, but the fiscal and political pictures are troublesome.

New Indications on Monetary Policy
BRAZIL ECONOMICS · Report · 25 Sep 2017

Against a backdrop of anchored inflation expectations and a negative output gap, the Central Bank has induced a decline of the market real interest rate below the neutral level. The indication in the most recent Inflation Report is that the SELIC rate can remain stable for a long period – probabl...

Market Real Interest Rate and Neutral Real Interest Rate
BRAZIL ECONOMICS · Report · 18 Sep 2017

In its recent communication, the Central Bank left no margin for doubts: the ex-ante real interest rate is below the neutral real interest rate. Given the distance between actual and potential GDP – legacy of the severe recession that is just ending – monetary policy had to strongly stimulate the...

The Return of Growth: But How Strong?
BRAZIL ECONOMICS · Forecast · 11 Sep 2017

In the midst of risks posed by the difficulties of executing the fiscal adjustment and vagaries of the political crisis, the positive contribution of monetary policy deserves attention. The SELIC rate should continue falling, to 7% at the end of the year, when inflation will be 3.2%, well below t...

Will the SELIC Rate be 7% at the End of the Easing Cycle in December?
BRAZIL ECONOMICS · Report · 11 Sep 2017

At the last COPOM meeting, the Central Bank cut the SELIC rate by 1 percentage point, but made it clear that smaller cuts will occur at subsequent meetings. The market consensus – and our estimate – is that the SELIC rate will reach 7% in December. But will this be the end of the cycle? On the on...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 04 Sep 2017

The end of the recession – sealed by two straight quarters of GDP growth – and the continuing decline of inflation, interest rates and unemployment, are positive signs offered by the competent economic team. However, on the political side the picture is the opposite. The president’s fragility, re...

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