Daily Management Review

Possible Approval For Pension Reform & Easing Consumer Price Could Lead To ‘Lower Policy Rates’ In Brazil


08/28/2017


Economists look at the performance of various sectors in Brazil while several noted an increment, although the “price pressure” could be a harbinger for drop in interest rates.



The Brazilian finance authorities now have got space to introduce “lower policy rates” given the easing consumer prices in the country, think the economists, particularly “if Brasilia approved pensions reforms next month”. According to Digitallook:
“In non-adjusted terms, the country's IPCA-15 consumer price gauge rose by 0.35% month-on-month in August and by 2.7% year-on-year, according to IBGE”.
 
The said pace in the increment of “annual price” marked to be “slightly lower” than the previous month’s “2.8% clip observed”. However, the prints of August was able to match the economists’ expectations. The “transport fares and housing” rates accounted by Dearer showed an increment from July whereby rising “1.4%”, while the ethanol and gasoline costs also shot up by six percent. Meanwhile, the prices in the housing sector rose by one percent and “electricity tariffs” went up by “4.3%”.
 
Pantheon Macroeconomics’ Senior International Economist, Andres Abadia, considered that the “largest economy” of South America, under the “price pressures” remained “under wraps”, whereby the fall of interest could be predictable in case the congress put an approval on the reform of the “country's pensions in the next few months”. The possible month for this could arrive as soon as September.
 
He also admitted that a threat hovered by global risks, however, given the “fundamentals of the country's currency” one could say that it remained “relatively resilient” while facing “sharp risk-off events”. In his words:
“Looking ahead, headline inflation will edge higher over the coming months, but the weakness of the labor market, favorable base effects, and the stable BRL all suggest that the inflation rate will hover around only 3%. With inflation low, political risks in check—at least for now—and recent progress on the fiscal front, we think the BCB will cut rates to 7.25% by the end of the year.”
 
 
 
References:
www.digitallook.com







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