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COUNTRY INSIGHTS

The End of the Adjustment Cycle and the Risk Ahead
BRAZIL ECONOMICS · Report · 27 Sep 2022

Last week, the Central Bank announced the end of the monetary tightening cycle, keeping the SELIC rate at 13.75%. In a scenario of high internal and external uncertainty, the COPOM opted for caution, but did not fail to warn about the effects of changes in the fiscal framework. Although the most ...

Economic Activity: The Start of Deceleration
BRAZIL ECONOMICS · Report · 19 Sep 2022

Since the lags of monetary policy are long and variable, a degree of uncertainty always exists regarding the start of the effects of restrictive monetary policy. Last week, three important indicators of economic activity had contrary signs. While in June and July, real revenue from services and t...

The Challenges and Projections for 2023
BRAZIL ECONOMICS · Forecast · 12 Sep 2022

From both the international and domestic standpoints, the economic scenario for 2023 is challenging. Global growth is decelerating, more so in Europe than in the United States, a pattern that also holds sway in China and the great majority of other emerging countries. As a leading exporter of com...

The Temporary GDP Growth in The Second Quarter
BRAZIL ECONOMICS · Report · 06 Sep 2022

GDP growth in the second quarter was 1.2%, greater than our expectation of 0.8%. This prompts us to project growth of 3% for the year. Although expansion of the global economy contributed to this result, it was mainly the fruit of the strong fiscal stimuli, which increased consumption and gross f...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 29 Aug 2022

The great majority of the recent opinion polls indicate that Lula’s advantage over Bolsonaro is narrowing, and in some cases even suggest a statistical tie. The rejection of both leading candidates also is relatively equal, at a level above 40%, reflecting the sharp polarization of the current el...

The Neutral Interest Rate and Fiscal Policy in Brazil
BRAZIL ECONOMICS · Report · 22 Aug 2022

It is known that economically mature countries tend to have low neutral interest rates. The causes are also known, ranging from the demographic transition to the lower investment rate, and it is necessary to understand how monetary policy operates when the interest rate in equilibrium approaches ...

The American Economy and the Brazilian Scenario for 2023
BRAZIL ECONOMICS · Report · 15 Aug 2022

To formulate scenarios for 2023, a fundamental piece of the current puzzle is the evolution of the economy in the United States. Initially, it is necessary to distinguish the effects of high-frequency movements of the S&P500 on the IBOVESPA (a large part of the recent recovery of the IBOVESPA has...

The Central Bank’s Policy and the Growth of the Neutral Interest Rate
BRAZIL ECONOMICS · Report · 08 Aug 2022

At the last COPOM meeting, the Central Bank raised the Selic rate to 13.75% a year and did not rule out one or more new increases of lesser magnitude. Even though it is widely recognized that monetary policy is already strongly restrictive, which will lead to a decline of inflation, criticisms ex...

Monetary Policy Without a Fiscal Anchor
BRAZIL ECONOMICS · Report · 03 Aug 2022

The Central Bank’s formal independence was incontestably a great achievement. But this is only a necessary condition to control inflation. The high risk premiums due to the government’s failure to satisfy the intertemporal budget constraint will lead to unsustainable interest rates and high infla...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 01 Aug 2022

If the election were held today, Lula would win in the first round with 52% of the votes versus Bolsonaro with 32% according to the most recent Datafolha survey. Much can change in the 60 remaining days, but as things stand now, Lula has a commanding lead. In the international arena, after five m...

The Central Bank’s Dilemma: to stop or not to stop?
BRAZIL ECONOMICS · Report · 25 Jul 2022

At the next COPOM meeting, the Central Bank will likely increase the SELIC rate by 50 basis points, to 13.75%. Although this rate is strongly restrictive, will this mark the end of the monetary tightening cycle? The analysis of the balance of risks – domestic and international – indicates it woul...

Fiscal Fragility and Concern Over the Road Ahead
BRAZIL ECONOMICS · Report · 18 Jul 2022

In the past 30 days, the Real has weakened from R$5.10/US$ to R$5.40/US$, once again placing it among the currencies that have depreciated the most in relation to the dollar. At the same time, the 10 year Brazilian CDS quotes – a traditional risk measure – have surpassed 400 points. Since the cou...

Greater GDP Growth in 2022 and Contradictory Impulses
BRAZIL ECONOMICS · Report · 11 Jul 2022 · 1 response

All indications are that GDP will expand more than previously expected in 2022, by around 2% instead of our previous projection of 1.6%. The steep decline of unemployment, the better performance of real retail sales and exports, the evidence of recovery of civil construction and the growth of all...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 05 Jul 2022

As the war caused by Russia’s invasion of Ukraine enters its fifth month, there are still no signs of a negotiated solution. Interests and relations of dependence consolidated in recent decades are feeding the conflict, provoking huge humanitarian and economic damages, besides the ever-present ri...

The Challenge of Guiding Inflation to The Target
BRAZIL ECONOMICS · Report · 28 Jun 2022

The IPCA-15 for June, announced last week, increased the concern regarding unanchoring of expectations. All the core measures have continued to rise, and the annualized rates (quarterly and monthly) of the great majority of the disaggregated indexes are now higher than the cumulative rate over th...

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