At the meeting ending on April 12, 2017, Banco Central’s Copom (Monetary Policy Committee) decided to further lower the 1% discount rate, moving from 12.25% to 11.25%.
At the same time, inflation has dropped to 4.04%.
This month there were no events that significantly changed the expectations of economists and economic operators in general. Also revelations about politicians accused of corruption by the Odebrecht group’s informants (April 12, 2017), involving many ministers of the current government and senior leaders of the coalition parties supporting President Temer, did not have any major repercussions.
The government continues on the road to reforms: the partial one on labor legislation (which will be discussed at the Chamber of Deputies these days) and the social security system, which is expected to have a greater opposition than expected.
Particular attention is paid to the general strike of 28 April 2017, since strong participation might weaken the support of some parties to the government and therefore to the reforms.
Let us look at some fresh data:
GDP (Value added at market prices)
|GDP – real growth (%)||3,9%||1,8%||2,7%||0,1%||-3,9%||-3,6%||0,43%|
The GDP growth forecast is slightly down on a month ago (it was +0.50%), but the signals coming from industrial production and international commodity prices are encouraging.
The recovery in the services sector is still slow, because it was the least sector hit by the recession of 2015/2016.
Inflation and real/dollar exchange
|IPCA (IBGE – %)||6,50%||5,80%||5,90%||6,40%||10,67%||6,29%||4,04%|
Inflation forecasts for 2017 fell slightly from 4.15% a month ago to 4.04%. The slight recovery, on the other hand, has not yet touched the consumption of households and hence did not trigger a price acceleration.
|Exchange rate R$/US$ (end of the period)||1,88||2,04||2,34||2,66||3,9||3,25||3,23|
Still falling in R$ / US$ exchange rate forecast for 2017, today estimated at 3.23 (it was 3.29 a month ago). Yesterday, 25/4/2017, the change was at 3.15.
In appreciation the euro, thanks to the results of the first round of French elections: yesterday it was quoted 3.43 (after oscillating between 3.30 and 3.35 for several months).
|Nominal Interest rate (end of the períod)||11,00%||7,30%||10,00%||11,80%||14,87%||13,75%||9,00%|
|Real interest (deflator: IPCA)||4,80%||2,50%||2,10%||4,20%||2,60%||6,90%||4,85%|
Another half-percentage-point decline of the SELIC forecasts at end-2017, now at 8.50%.
We recall that today SELIC is 11.25%, and a further decline of 2.75% is expected by the end of 2017. In May a further decrease of 1% is expected, then the size (or rhythm) of the cuts should decrease.
Economists also expect a 2018 without further changes in SELIC, which should close the year at 8.50%.
Real interest rates also decreased, below 4.50%.
The Brazilian stock exchange (Bovespa)
Recovery month for Brazilian Stocks. The Bovespa Index (Ibovespa) exceeded 65,000 points, but is still far from nearly 70,000 points reached in late February.
Some of the most successful growth in the last month:
Alpargatas: + 34%
Gol: + 21%
Marfrig: + 20%
Telefonica: + 8%
Vale ON: + 5%
TIM: + 4%