BCB Minutes: Hawkish and Indicating Hikes

November 12, 2024 2:49 PM UTC

The Brazilian Central Bank (BCB) remains hawkish, raising rates by 50 bps to 11.25% amid resilient domestic growth and unanchored inflation expectations. Key concerns include rising uncertainty in the fiscal landscape and exchange rate volatility, prompting cautious monetary policy. The BCB signals

Brazil CPI Review: Food and Energy Drive Inflation Up

November 11, 2024 9:13 PM UTC

Brazil’s October CPI rose 0.56%, pushing the year-over-year rate to 4.7%, above the Brazilian Central Bank’s (BCB) 4.5% target. The increase was driven by food and housing costs, especially due to rising electricity tariffs impacted by low hydroelectric reservoir levels. Although core CPI remain

BCB Review: Unanimous 50bps Hike

November 7, 2024 2:19 PM UTC

The Brazilian Central Bank raised its policy rate by 50 basis points to 11.25%, signaling heightened concerns over inflation risks driven by domestic dynamics and global uncertainties. While noting external volatility and fiscal policy impacts, the BCB emphasized that persistent inflation requires a

BCB Preview: 50bps Hike and More to Come

November 4, 2024 8:05 PM UTC

The Brazilian Central Bank (BCB) is expected to raise rates by 50bps in November to curb rising inflation, which could exceed the 4.5% upper limit if inflationary shocks persist. Market concerns focus on food prices, a strong labor market, and external exchange rate pressures. The new BCB President,

Brazil: Credit is Resilient, but Some Deceleration is Expected

November 1, 2024 8:58 PM UTC

In early 2024, Brazil's credit market saw an 8.2% growth, supported by easing inflation and favorable monetary policy. Both earmarked and non-earmarked credit contributed, with household credit outpacing enterprise lending. Delinquency rates remain manageable at 3.8%. However, deceleration is expect

Brazil: Muncipal Elections Shows the Force of the Center-Right

October 29, 2024 3:07 PM UTC

In Brazil’s recent municipal elections, Lula’s left and center-left base saw limited success, winning only 25% of municipalities, while the remaining went to right and center-right forces. The political landscape remains fragmented, with centrist influence strong. New right-wing figures are emer

BRICS Summit 2024: Kazan Declaration not a Game Changer

October 28, 2024 11:41 AM UTC

Bottom Line: The BRICS Summit, which was held in Kazan on October 22-24, was the first summit following BRICS has expanded to include Ethiopia, Iran, Egypt and the United Arab Emirates. Despite expectations, Kazan deceleration, which was a joint statement signed after the summit, is not a game-chan

Brazil: High Expenditure Levels Challenge Fiscal Stability

October 25, 2024 5:40 PM UTC

Brazil’s fiscal data through August shows a primary deficit of 2.3% of GDP, with expenditure growth outpacing revenue gains despite efforts to increase government income. Social transfers and unemployment benefits contributed to rising expenditures, now at 20.2% of GDP. The Central Bank’s recent

Brazil: Demand and Imported Prices Lead Inflation Rise

October 17, 2024 6:33 PM UTC

Our updated model shows that stronger-than-expected demand and BRL depreciation are driving Brazil’s inflation higher, while supply remains stable. Despite recent rate hikes, inflation expectations have risen, loosening monetary policy. We expect the BCB to implement two more 50 bps hikes before p

Central and Latin America: Country Risk Ratings

October 17, 2024 10:00 AM UTC

We provide country risk reviews for select Central and Latin America countries.  

Brazil CPI Review: 0.4% Growth in September

October 9, 2024 3:00 PM UTC

In September, Brazil's CPI rose by 0.44%, aligning with market expectations and increasing the year-over-year rate to 4.4%. The surge was mainly driven by rising electricity prices, influenced by droughts impacting hydroelectric generation. While other categories behaved predictably, cost-push infla

Brazil: Moody’s Upgrade Brazil’s Rating

October 2, 2024 2:22 PM UTC

Moody's upgraded Brazil's rating to Baa1, one level below investment grade, citing growth and structural reforms like tax and labor reforms. While Brazil's fiscal framework still faces challenges, adherence to it could stabilize the Debt/GDP ratio. Analysts were surprised by the upgrade, but maintai

Markets: Rate Cuts or Geopolitics?

October 2, 2024 9:36 AM UTC

Israel will likely counteract Iran, which will prompt a further missile attack by Iran.  However, our bias remains that Israel main aim is to have a buffer zone in southern Lebanon up to the Latani river and not fight a prolonged war with Iran.  This limits the economic fallout globally and on oil

Brazil: Quarterly Inflation Report Shows BCB Worries

October 1, 2024 2:10 PM UTC

The Brazilian Central Bank's latest report highlights stronger-than-expected economic growth of 1.4% in Q2 and a positive output gap, raising inflation risks. While non-core inflation decreased, core measures like services inflation remain sticky. Credit growth continues to be robust, but fiscal pol

September Outlook: Rate Cuts But How Far?

September 27, 2024 7:44 AM UTC

The 15 chapters of our September Outlook have now been published.  See the headlines and weblinks enclosed for links to the articles on economic, policy and markets for the 23 countries that we cover.

EM FX Outlook: Fed Easing Helps but Divergent Trends

September 26, 2024 8:00 AM UTC

  USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.  However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY).  Where inflation differentials are modest against the U.S., but

BCB Minutes: Adding Some Hawkishness to the Communique

September 25, 2024 1:44 PM UTC

The Brazilian Central Bank raised the policy rate by 25 bps to 10.75%, citing stronger-than-expected economic activity and deteriorating inflation expectations. The committee highlighted rising inflationary pressures, especially in wages and credit growth. While future rate hikes are likely, no forw

Outlook Overview: Rate Cuts But How Far?

September 25, 2024 7:30 AM UTC

·        The U.S. economy is slowing, with the critical question being whether this is a soft or harder landing.  Our broad analysis leaves us inclined to the soft landing view into 2025, though we shall watch real sector data closely over the next 3-6 months to check the trajectory.  Else

LatAm Outlook: Diverging Patterns

September 24, 2024 12:54 PM UTC

·       Brazil and Mexico started to diverge in terms of growth. While we see Brazil GDP growing above 3.0% in 2024 (pushed by the internal demand), we see Mexico’s growth decelerating to 1.3%, due to weaker demand from U.S. and contractionary monetary policy. In 2025, we see Brazil growing

Equities Outlook: Choppy U.S. and Outperformance Elsewhere

September 24, 2024 8:30 AM UTC

 •     We now forecast 5450 for the S&P500 for end 2024, but could see a move to 5200/5000 in the next 3-6 months as volatile data keeps the soft v hard landing debate alive.  On our baseline of a U.S. soft landing, we would see the S&P500 at 5600 by end 2025. The tech sector is still really i

BCB Review: Switching Back to Hikes

September 19, 2024 12:50 PM UTC

The Brazilian Central Bank (BCB) raised the policy rate to 10.75%, signaling more hikes due to domestic pressures, including stronger economic activity and de-anchored inflation expectations. Despite global uncertainties, the decision reflects concerns about Brazil's positive output gap and fragile

Sep 27 Outlook Webinar: Rate Cuts But How Far?

September 15, 2024 10:30 AM UTC

    Uncertainty about whether the U.S. economy will have a soft or hard landing is growing as the market approaches Q4.  This is shaping the debate regarding the scale of easing through the remainder of 2024 and 2025 by the Fed.  European easing is underway, but how much further will central ba

Brazil CPI Review: Drop on Electricity Prices Warrants Stability in August

September 11, 2024 10:31 PM UTC

In August, Brazil’s CPI remained stable at 0% month-over-month, with the year-over-year rate dropping to 4.2% from 4.5% in July. This stability was driven by declines in the Housing group and food prices. Education and household expenditures increased by 0.7%, while the Transport group stayed unch

Brazil: GDP Surprises in Q2, Growing 1.4% (q/q)

September 3, 2024 3:07 PM UTC

Brazil's Q2 GDP grew 1.4% (q/q), surpassing expectations, driven by strong industrial growth and robust internal demand. Investment increased by 2.1%, while external demand lagged due to rising imports. Agriculture declined due to floods, but services grew steadily. With internal demand as the key g

Brazil GDP Preview: 1% Growth in Q2 is Good News

August 30, 2024 2:19 PM UTC

Brazil's Q2 2024 GDP is expected to grow 1.0%, driven by strong domestic demand and recovery in Services, Construction, and Mining. Despite analysts predicting a slowdown, fiscal stimuli and election-related spending have fueled growth. However, concerns remain whether this growth is sustainable or

Brazil: The Case for a Hike?

August 28, 2024 1:42 PM UTC

Despite the market's push for a rate hike by the Brazilian Central Bank (BCB), we believe the current policy rate of 10.5% is sufficiently restrictive to ensure inflation converges. However, de-anchored inflation expectations, fiscal concerns, strong economic activity, and a new BCB president desiri

Brazil: Activity Surprises Again in Q2

August 19, 2024 1:24 PM UTC

The Brazilian economy outperformed expectations in Q2, with a 1.1% growth (according to monthly data) driven by industrial production and strong household demand. This strength likely stems from the fiscal push in late 2023, though a slight deceleration is anticipated in the second half of 2024. Wit

EM Markets Divergence with China Harder Landing Concerns

August 14, 2024 3:35 PM UTC

Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.  What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets

Brazil CPI Review: 0.4% Growth in July

August 9, 2024 3:14 PM UTC

Brazil's CPI rose by 0.38% in July, pushing the Y/Y rate to 4.5%, the upper limit of the Central Bank's target. The increase was driven by rising transport costs, especially gasoline and airfare, while food prices fell. Despite this, uncertainty remains about the economy's potential overheating, wit

BCB Minutes: Hawkish and Consideration over Hikes

August 6, 2024 2:55 PM UTC

The Brazilian Central Bank kept the policy rate at 10.5%, emphasizing a hawkish stance amidst global uncertainties and risk aversion. Inflation is projected at 3.2%, above the 3% target. The board remains cautious, with potential rate hikes if the economic situation worsens. A rate cut may be possib

Brazil CPI Preview: Inflation to Rise in July

August 5, 2024 3:13 PM UTC

The Brazilian CPI is expected to rise by 0.3% m/m in July, pushing Y/Y CPI to 4.4%. This increase is mainly due to higher gasoline prices affecting the Transport and Housing groups. Inflationary risks are emerging, with strong economic activity and sticky service inflation, but a policy rate cut rem

BCB Review: A Hawkish Tweak

August 1, 2024 1:45 PM UTC

The Brazilian Central Bank (BCB) kept the policy rate unchanged at 10.5%, with a hawkish tone highlighting risks. Strong domestic growth and employment data persist despite monetary tightening. Inflation expectations for 2024 and 2025 are at 4.1% and 4.0%, respectively, above the 3.0% target. Fiscal

Brazil: An Eye on the Lower Bound of the Fiscal Target

July 23, 2024 4:07 PM UTC

The Brazilian government will implement BRL 15 billion in contingency expenditures to meet fiscal targets, aiming for a 0.25% GDP primary deficit in 2024. This move, though addressing fiscal issues, pursues the lower target band and may undermine fiscal credibility. The contingency is due to revenue

Brazil and Mexico: Supply and Demand Factors Affecting Inflation

July 17, 2024 6:52 PM UTC

We decomposed inflation in Brazil and Mexico using a Vector Autoregressive (VAR) Model, focusing on Imported Inflation, Demand, Supply, and Monetary Policy. Our analysis from 2003 to 2024 for Brazil and 2005 to 2024 for Mexico shows Brazil's inflation was primarily driven by supply and imported infl

Latin America: Country Risk Ratings

July 12, 2024 10:05 AM UTC

We provide country risk reviews for select Latin America countries including Argentina, Brazil, Chile, Colombia and Mexico. 

Brazil CPI Review: Inflation Below Expectations in June

July 10, 2024 5:11 PM UTC

The IBGE's June CPI figures show a 0.21% monthly increase, below market expectations. The Y/Y index rose to 4.2%, driven by increases in potatoes, milk, and coffee. The floods in the South had a minimal impact. Health and Housing saw modest rises, while core CPI remained stable. Despite potential ri

Brazil: Demographics Contributing to Lower the Unemployment Rate

July 3, 2024 1:29 PM UTC

From 2012 to 2019, Brazil’s labor force participation grew, peaking at 63.7% in December 2019. Post-pandemic, it has fallen to 62.1%, influenced by early retirements, fiscal aid, and demographic shifts as more people enter age groups with lower participation. Intragroup effects mainly drive partic

Webinar Recording June Outlook: Cyclical and Structural Forces

July 2, 2024 7:30 AM UTC

EM After the Elections: Fiscal Focus and Inflation Questions

July 1, 2024 8:05 AM UTC

Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil.  India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip

Brazil: Adoption of Continuous Targeting Means Not Much Change

June 27, 2024 1:28 PM UTC

The Brazilian government has revised the BCB's inflation targeting framework, effective January 2025, to a continuous target system. If inflation exceeds the target bands for six consecutive months, the BCB must explain the discrepancy. The 3.0% target with 1.5% bands remains unchanged, alleviating

BCB Minutes: Deterioration of the Scenario Requires Higher Rates

June 26, 2024 1:32 PM UTC

The Brazilian Central Bank maintained the SELIC rate at 10.5%, emphasizing a unanimous, hawkish stance on inflation. Markets question BCB's inflation control with upcoming leadership changes. External uncertainties, domestic consumption surprises, and rising inflation expectations were highlighted.

June Outlook: Cyclical and Structural Forces

June 26, 2024 7:58 AM UTC

The 15 chapters of our June Outlook have now been published.  See the headlines and weblinks enclosed for links to the articles on economic, policy and markets for the 23 countries that we cover

Outlook Overview: Cyclical and Structural Forces

June 25, 2024 10:15 AM UTC

•    The global economy is showing signs of healing, as inflation comes back towards targets and growth recovers momentum in some economies. Nevertheless, the cyclical headwind of lagged monetary tightening remains in DM countries, and will likely be one of the forces slowing the U.S. economy

EMFX Outlook: USD Strength to Ebb with Different EM Impact

June 25, 2024 8:05 AM UTC

 We see Fed rate cuts from September starting to soften USD strength into year end and 2025.  Beneficiaries will include currencies with inflation moving towards target and high real rates or, alternatively, undervalued currencies. This should benefit the Brazilian Real (BRL) and Indonesian Rupiah

Equities Outlook: Choppy U.S. and Outperformance Elsewhere

June 25, 2024 7:05 AM UTC

 •    U.S. equities are overvalued and waiting for earnings growth to catch-up, which leaves the market choppy, directionless and vulnerable to intermittent 5% corrections. Our forecast slowing of the U.S. economy before Fed rate cuts or nervousness about the post-election prospects are potenti

LatAm Outlook: Pausing the Cuts

June 24, 2024 6:00 PM UTC

·       Brazil and Mexico growth will decelerate from the growth rates in 2023. The stronger basis of comparisons in 2023 and the tight monetary policy will diminish growth during 2024. Brazil robust Agricultural growth will not repeat in 2023 while Mexico is on the limit of growing due to a

BCB Review: A Pause in the Cutting Cycle

June 19, 2024 10:17 PM UTC

The Brazilian Central Bank kept the policy rate at 10.5%, citing economic uncertainty and a need for caution. Inflation expectations for 2025 are 3.8%, above the 3.0% target. Political interference concerns persist, but the unanimous decision indicates a technical approach. The BRL's depreciation ma

BCB Preview: A Pause Amid the Risks

June 17, 2024 2:34 PM UTC

The Brazilian Central Bank (BCB) is expected to maintain the SELIC rate at 10.5% amid external sector volatility, stubborn service inflation, and deteriorating inflation expectations. A hawkish majority on the board suggests a pause despite potential for cuts. Risks include rising food prices post-f

Brazil CPI Review: 0.5% Rise in May and Worsening Conditions

June 11, 2024 1:55 PM UTC

Brazil’s CPI grew by 0.46% in May, exceeding expectations. Year-over-year CPI rose to 3.9%, driven by significant increases in food and beverage prices. Services inflation also increased. Strong labor market demand and supply disruptions from floods are pushing prices up. With the BRL devaluation