BCB Preview: 25bps or 50bps cut?

May 6, 2024 1:02 PM UTC

The Brazilian Central Bank (BCB) convenes on May 8 to set the policy rate. Previous forward guidance hinted at a 50bps cut in May, but recent statements from BCB President Roberto and some weakness in the BRL have shifted expectations to a 25bps cut. However, we anticipate the BCB maintaining a 50bp

EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Moody’s Improves Outlook Perspective Due to Higher Growth

May 2, 2024 2:27 PM UTC

Moody’s upgraded Brazil's outlook to positive from stable, maintaining its Ba2 rating, signaling a potential move to Ba1 soon. Strong growth prospects, attributed to institutional reforms, drove this shift. Despite lingering doubts, improved fiscal conditions and anticipated tax reform are bolster

Brazil: Credit Decelerating Amid Tighter Conditions

April 26, 2024 1:21 PM UTC

Despite the BCB's initiation of the cutting cycle, credit is anticipated to decelerate due to monetary policy lags. Enterprises face the most significant impact, with nominal growth dropping to 4.1% in February from 12.1% a year prior. While household credit growth slows to 10.4% annually from 17%,

Brazil: Wage Inflation Will Likely Not Be a Big Deal

April 24, 2024 3:19 PM UTC

Our analysis delves into recent trends in the Brazilian labor market, focusing on CPI and wage inflation. Utilizing a model akin to Ghomi et al. (2024) and Blanchard and Bernanke (2023), we dissect recent spikes in wage inflation and CPI growth. Notably, our findings suggest that recent wage spikes

Brazil: Revision of Targets Shows the Weakness of the New Fiscal Framework

April 18, 2024 1:39 PM UTC

The Brazilian government has revised its budget targets for 2025 and 2026, lowering the deficit to 0% and a 0.25% surplus in 2025 and 2026 respectively, from 0.5% surplus in 2025 and 1% in 2026. However, reliance on revenue increases poses challenges amid resistance from Congress. Despite reduced ta

Brazil CPI Review: Inflation Decelerates in March

April 10, 2024 2:57 PM UTC

The latest CPI data from Brazil reveals a modest increase of 0.16% (m/m) in March, slightly below market forecasts. Despite this, the year-on-year CPI has dropped to 3.9%, remaining within the BCB bands but above the central target. Notably, the Food and Beverages group saw the most significant rise

Brazil: What About the Fiscal?

April 3, 2024 2:31 PM UTC

In 2023, Brazil witnessed a significant fiscal decline, with the GDP surplus of 0.5% in 2022 turning into a 2.1% deficit, surpassing the targeted 0.5% deficit set by the new fiscal rule. Despite measures aimed at reinstating fiscal sustainability, immediate adjustments are unlikely. The deterioratio

Asset Allocation: Pausing for Breath

April 2, 2024 9:00 AM UTC

Into Q2, data and policy (actual and perceived) will dominate DM markets. The ECB will likely take the spotlight with a 25bps cut on June 7, as the Fed face a better growth/more fiscal policy expansion and a tighter labor market than the EZ but also with a better productivity backdrop and outlook to

Brazil: Inflation Report Points to a Scenario Too Good for the BCB Board to Believe it

March 28, 2024 2:20 PM UTC

The Brazilian Central Bank's Quarterly Inflation Report reflects uncertainty over disinflation and emphasizes caution in monetary policy. Despite slower expected disinflation and inflationary surprises in certain sectors, the BCB projects optimism with inflation nearing target. Labor market data sho

March Outlook: Europe in Focus, Then Elections Around the World

March 27, 2024 9:00 AM UTC

BCB Minutes: Doors Opens to Diminish the Cuts Pace in June

March 26, 2024 1:11 PM UTC

The Brazilian Central Bank has released the minutes of their last minutes. The minutes highlighted the uncertainty, labour market pressures and unanchored expectations. They decided to reduce the horizon of the 50bps ace to the May meeting which indicates a prospective reduction to diminish the pace

Outlook Overview: Europe in Focus, Then Elections Around the World

March 25, 2024 11:15 AM UTC

LatAm Outlook: Getting Deeper in the Cutting Cycle

March 22, 2024 7:04 PM UTC

·       Brazil and Mexico growth will decelerate from the growth rates seen 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 2024, while Mexico growth is restrained by a tigh

BCB Review: Forward Guidance Kept but Chance to be Taken Out Soon

March 21, 2024 12:50 PM UTC

The Central Bank (BCB) slashed the policy rate by 50bps to 10.75%, with further cuts anticipated. Medium-term easing hinges on inflation dynamics and economic factors. The BCB's forward guidance suggests a potential shift in communication and cut magnitude by June, changing the cut pace to 25bps fro

BCB Preview: 50bps Cut and Softer Forward Guidance

March 18, 2024 4:48 PM UTC

The Brazilian Central Bank is anticipated to cut the policy rate by 50bps, reaching 10.75%, amidst easing inflation and cautious market sentiment. The recent surge in food prices raises concerns, while the BCB is expected to abandon its usual forward guidance in favor of more data-driven decisions.

Brazil CPI Review: 0.8% Growth in the month but Stable on Annual Terms

March 12, 2024 6:55 PM UTC

The Brazilian National Statistics Institute (IBGE) released February's CPI figures, slightly exceeding market expectations at 0.82% (m/m), maintaining the Y/Y index at 4.5%. Notably, the rise was seen in the Educational group, alongside gasoline prices (+2.48%) and a drop in airfare tickets (-10.4%)

Brazil CPI Preview: 0.7% in February will likely be only a Transitory Problem

March 8, 2024 8:56 PM UTC

IBGE will release February's CPI data on Mar. 12, forecasting a 0.7% increase, driven mainly by education and food sectors. While some rises may persist, they're not indicative of a general price surge. Despite a 0.7% rise, Y/Y CPI is expected to drop to 4.4%, aligning with BCB targets. Forecasts su

Brazil GDP Review: Stagnation in Q4, but 2.9% Growth in 2023

March 1, 2024 1:37 PM UTC

Brazil's GDP remained stable in Q4 2023, growing marginally lower than expected. Agriculture saw a significant contraction, while Industry and Services showed modest growth. Government consumption offset household contraction, and investment reversed a five-quarter decline. Despite annual growth, de

February 28, 2024 2:51 PM UTC

The Brazilian GDP is anticipated to have contracted by 0.1% in Q4 2023, yet the annual growth for 2023 is expected at 3.1%, marking the third consecutive year above the 3.0% threshold. Agricultural sector's significant 15% growth, primarily driven by soybean harvest, offsets the deceleration. Tight

EMFX: Carry and Domestic Fundamentals Rather Than the USD

February 22, 2024 10:00 AM UTC

Bottom Line: Most major EMFX currencies have performed better than the Euro or the Japanese Yen against the USD in 2024 (Figure 1).  This is due to carry trades in Latam, but elsewhere reflects global equity love on Indian equities or domestic fundamentals.  This resilience for Brazilian Real/Indi

Brazil: Slower Fourth Quarter to Confirm Deceleration

February 21, 2024 7:32 PM UTC

The Brazilian economy experienced marginal growth of 0.2% in 2023, signaling a return to pre-pandemic low-growth trends. Despite a promising agricultural sector, projections show a contraction in 2024. Factors such as consumption push and cautious monetary policy influence future growth prospects. H

Brazil: Real Wage Growth to Boost Consumption

February 14, 2024 10:20 PM UTC

Brazil's labor market showed remarkable resilience in 2023, with a notable decrease in unemployment to 7.4% from 8.6%. Increased occupation drove consumption and growth, though real wage growth outpaced job creation. Despite challenges, strong syndicates and minimum wage policies will sustain upward

Brazil: Bolsonaro Closer to Facing Jail Time

February 13, 2024 1:02 PM UTC

The Brazilian Supreme Court's action against Bolsonaro's inner circle, accusing them of undermining the rule of law and plotting against electronic voting, signals a potential turning point. Bolsonaro's popularity, despite legal challenges, underscores Brazil's divided political landscape. The upcom

Brazil CPI Review: Food Prices Lead the Rise in January

February 8, 2024 4:19 PM UTC

The Brazilian National Institute of Statistics reported January's CPI, rising 0.42% (m/m), slightly above expectations, with a Y/Y index drop to 4.5%. Food and Beverages saw the biggest increase at 1.4% (m/m). Despite CPI exceeding expectations, underlying measures show marginal improvements, sugges

BCB Minutes: Caution within the Easing Cycle

February 6, 2024 1:22 PM UTC

The BCB released minutes detailing the 50bps cut to SELIC, shedding light on monitored risks. Despite a unanimous vote, differences in language emerged, especially regarding variables. Notably, new government-appointed members were present. Internationally, the board noted minimal impact from Fed de

BCB Review: 50Bps Cut Maintained

February 1, 2024 2:36 PM UTC

The Brazilian Central Bank (BCB) maintained a widely expected 50bps cut in the policy rate, bringing it down to 11.25% from 11.75%. The BCB's neutral communique highlighted caution in emerging economies amid global monetary tightening. The domestic scenario, aligned with contractionary policies, saw

BCB Preview: 50 bps Cut to Be Kept but Caution in the Communique

January 29, 2024 8:51 PM UTC

The Brazilian Central Bank is expected to continue cutting interest rates on January 31, aiming to address the overly contractionary policy rate of 11.75%. In the face of persistent inflation around 4%-5%, concerns include El Niño's impact on food prices and uncertainties in services inflation. Fis

Brazil: Government Launches New Industrial Plan, Same Old Policies and Limited Impact

January 23, 2024 3:54 PM UTC

The new Industrial Policy launched by the Brazilian Government aims to revitalize the struggling industry, focusing on six key sectors. Despite addressing issues like the "Brazilian Cost" and proposing substantial investments, skepticism lingers due to historical challenges and high production costs

Brazil CPI Review: December CPI Prompts some Caution

January 23, 2024 10:07 AM UTC

December's CPI data in Brazil exceeded expectations with a 0.6% month-on-month increase, contributing to a 4.6% year-on-year CPI for 2023, slightly above the central bank's target. Food and Beverage prices surged (+1.1%), driven by year-end festivities, while service inflation remains a concern. Des

Latin and Central America: Country Risk Ratings

January 22, 2024 10:00 AM UTC

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

Webinar Recording December Outlook: Rate Cuts Into 2024

January 11, 2024 8:22 AM UTC

You can now access the webinar for the December Outlook here. 
To read the individual chapters please see the weblink below.  
Outlook Overview: Rate Cuts Into 2024 (here)
U.S. Outlook: Slower Growth to Sustain Improved Inflation Picture (here)
LatAm Outlook: Diverging Paths in 2024 (here)
China Outloo

Charting our Views December Outlook

January 8, 2024 9:05 AM UTC

Outlook Overview: Rate Cuts Into 2024 (here)
Economic Scenarios 
U.S. Outlook: Slower Growth to Sustain Improved Inflation Picture (here)
LatAm Outlook: Diverging Paths in 2024 (here)
Brazil Policy Rate and CPI Inflation (YoY, %)
China Outlook: Headwinds To China Growth (here)
Japan Outlook: Normalizing

December Outlook: Rate Cuts Into 2024

January 2, 2024 9:53 AM UTC

Outlook Overview: Rate Cuts Into 2024 (here)
U.S. Outlook: Slower Growth to Sustain Improved Inflation Picture (here)
LatAm Outlook: Diverging Paths in 2024 (here)
China Outlook: Headwinds To China Growth (here)
Japan Outlook: Normalizing Monetary Policy Soon (here)
Asia/Pacific (ex-China/Japan) Outlook:

Brazil: Approval of Tax Reform leads to Rating Improvement

December 21, 2023 10:25 AM UTC

The new tax system will be implemented gradually, commencing in 2027 for the federal VAT and 2033 for the subnational VAT. The tax rate will be determined in the coming years, and due to Brazil's need for revenue, it is expected to be one of the highest VAT rates globally, potentially reaching 28%.

BCB Minutes: Conservative Approach to the Inflation Battle

December 20, 2023 11:16 AM UTC

Figure 1: Brazil Policy Rate (%)Source: BCB and Continuum Economics
The Brazilian Central Bank has released the minutes of its recent meeting, during which it lowered the policy rate by 50 basis points to 11.75%, in line with market expectations. As customary for the BCB, the minutes took a conservat

December Outlook: Rate Cuts Into 2024

December 19, 2023 3:15 PM UTC

Japan Outlook: Normalizing Monetary Policy Soon (here)
DM FX Outlook: The Year of the Yen (here)
EM FX Outlook: USD Decline v Inflation Differentials (here)
Technical Analysis Quarterly Chartbook (here)

Outlook Overview: Rate Cuts Into 2024

December 18, 2023 3:42 PM UTC

·     Uncertainty still prevails around this central view.  The impact of lagged monetary tightening could be greater than our estimates and deliver mild recessions in some DM countries.  We also feel that the disinflationary process could be stronger and this would help bring inflation back

LatAm Outlook: Diverging Paths in 2024

December 15, 2023 12:25 PM UTC

Our Forecasts
Risks to Our Views
Source: Continuum Economics
Brazil: Switching Back to Slow Growth?
Brazil growth has finally begun to decelerate (here), as the growth in the third quarter dropped to 0.1% (q/q). However, growth for 2023 is expected to stand at 3.2% (Yr/Yr) which is quite a bit higher th

Brazil CPI Review: Inflation at 0.3% (m/m) in November

December 13, 2023 11:28 AM UTC

Figure 1: Brazil CPI by Groups (%, m/m)Source: IBGEThe Brazilian National Statistics Institute (IBGE) has release the CPI figure for November. The figures show a 0.3% (m/m) increase, in line with market expectations (0.3%). Therefore, Y/Y inflation has fell to 4.7% from 4.8% on October. Food and Bev

Brazil GDP Review: No Contraction is Good News

December 6, 2023 2:14 PM UTC

Figure 1: Brazil GDP by Sector (Seasonally adjusted, 2019 = 100)
          Source: IBGE
The Brazilian National Institute of Statistics (IBGE) has released GDP data for the third quarter. The figures surprised on the upside as the GDP grew by 0.1% (q/q) during the quarter, while the market wa