Higher-than-expected inflation due to the depreciation of the peso reduced the money supply, leading to an excessive monetary contraction.
The statement indicates that another 50-bp “adjustment” of the base rate is likely in the October meeting.
We will publish an in-depth report on Copom’s decision later tonight.
The backdrop of a continued easing cycle has not changed significantly since the last policy decision, on July 31, when the Selic was cut by 50 bps.
Additionally, Petrobras will not adjust fuel prices in the domestic market, despite oil prices soaring after the attacks in Saudi Arabia.
We expect the Copom to cut the Selic rate again, to 5.50%, at tomorrow's meeting.
The year-end Selic rate forecast declined 25 bps to 5.0% for 2020 amidst a sluggish economic recovery and benign inflation outlook.
The economic recovery is still slow and relatively erratic.
The weak BCB’s index goes against the stronger-than-expected increases registered in the retail and services indicators for the same period.
The more important components for our GDP tracking declined in the month, but the drop was softer than previously expected.
The more important components for our GDP tracking declined in the month, but the drop was softer than previously expected
Credit-linked sales continue to grow faster than income-sensitive ones, given the slow-paced employment recovery.
Credit-linked sales continue to grow faster than income-sensitive ones, given the slow-paced employment recovery.
The change goes in line with our view that the global slowdown, along with disappointing domestic dynamism, justifies additional rate cuts.
The change goes in line with our view that the global slowdown, along with disappointing domestic dynamism, justifies additional rate cuts.
Moderating inflation means higher odds of further monetary easing, likely already in September.
Moderating inflation means higher odds of further monetary easing, likely already in September.
Lower food and transport prices offset the upward pressures stemming from changes in electricity tariff flag prices.
Despite an expected improvement of growth pace data in 3Q19, activity remains structurally weak, paving the road for additional easing ahead.
Lower food and transport prices offset the upward pressures stemming from changes in electricity tariff flag prices
Weak activity corroborates the central bank signaling that additional easing may be necessary to ensure inflation converges to the target
The text will now head to the Senate’s floor
The committee is currently voting on the amendments and once the voting process is concluded, the text will head to the Senate’s floor.
The press release communicating the decision holds an easing bias, so even further cuts could materialize ahead.
July’s print showed no signs of recovery in the industrial sector, renewing expectations of a slow-paced activity recovery in the short term
29% consider his administration as “good” or “excellent”, somewhat lower than the 33% observed in the latest Datafolha poll, from July 4 and 5.
President Macri signed an executive order on Sunday to implement controls, a couple days after the country announced a debt restructuring.
In our view, the room to avoid capital controls was very limited.
Going forward, we expect the unemployment rate — under our seasonal adjustment — to finish the year at 11.8%.
The administration is sending legislation to Congress to engage in a re-profiling of the remaining debt
Economy Minister Lacunza announced a rescheduling of amortization payments of short-term local law bills denominated in pesos and in dollars
Our GDP growth forecasts are 0.8% in 2019 and 1.7% in 2020
The breakdown shows that the decline was driven by the expectations component
The result went in the opposite direction of other business sectors and consumer sentiment indicators, which improved in the month.
The capacity utilization for the sector advanced 0.7 p.p. (to 69.6%), the fifth consecutive increase
A plain sale of reserves to the market hadn’t took place since 2009.
The installed capacity utilization level increased slightly to 75.8%, still suggesting a slack in production factors.
The breakdown shows increases in both the current conditions (+1.2 p.p.) and the expectations component (+0.4 p.p.)
Retail confidence advanced 3.2 p.p. in August (to 98.7), the third consecutive increase.
The breakdown shows that the movement was driven by the current conditions component
Despite the increase, the index remain at a weak level.
For the time being, our full-year estimates for the IPCA are 3.6% for both 2019 and 2020
Uncertainties regarding the ability of the federal government to service public debt will likely continue, with adverse consequences for the peso and inflation
Relative to 2018, we expect private consumption to moderate its pace in 2019
This level of industrial business confidence is still low, consistent with a decline of 0.3% qoq/sa in industrial production.
The breakdown shows an increase in both the current conditions and the expectations components.
Overall, the economy continues to grow at a weak pace, hinting that demand-side inflationary pressures are low.
Fitch downgraded Argentina's sovereign debt from B to CCC.
We now see the policy rate ending this year at 7.25%.
In the statement announcing the decision, the rating agency highlighted the uncertainty following the results of the primary elections.
A meaningful activity acceleration in 2H19 remains elusive as consumer confidence stays low, the labor market weak and global growth slows.
We now see the policy rate ending this year at 7.25%.
Activity came in mixed at the end of the second quarter, with retail sales remaining strong, while the manufacturing drag intensified.
According to the press, the government will announce today a battery of measures to alleviate markets.
Industrial production, retail sales and trade balance will be published at 12:00 AM.
The changes follow the presidential primary elections held on Sunday, which showed a very different outcome than anticipated by pollsters.
See our Week Ahead full note at the end of this report.
Since Friday, the ARS weakened 23%, to 55.7 per USD. The interest rate paid on the 7-day Leliq rose to 74.8% from 63.7%, while the 5-year CDS hit 2,000 points.
Our forecasts remain at 3.6% for both 2019 and 2020.
At the margin, the indicator declined 1.0% mom/sa, taking the 3-month moving average to -0.2%.
The bill now heads to the Senate, where it will need to be approved by three-fifths majority in two rounds of voting once more.
Our forecasts remain at 3.6% for both 2019 and 2020.
There were 370 votes in favor and 124 against the proposal, both somewhat below the numbers of the first vote on the bill.
Broad retail sales were flat (+0.0%) in the month, while core retail sales expanded 0.2% mom/sa, both below market expectations.
The document also brought a lengthy, and interesting, assessment of the effects of social security reform on neutral rates.
Despite a more favorable base of comparison and added stimulus measures, sufficient headwinds would limit the recovery ahead
See our Week Ahead full note at the end of this report.
The non-mining GDP component posted its first monthly decline this year.
The components more closely related to investment (construction inputs and capital goods) also receded in the month, with no signs of recovery.
Low private confidence, a volatile external scenario, contained copper prices, and a weak labor market have resulted in an activity slowdown.
The components more closely related to investment also declined in the month, with no signs of recovery.
The Copom reduced the interest rate by 0.50 pp and signaled an additional adjustment of the same magnitude at the next meeting.
In our view, recent data are consistent with the start of a more intense easing cycle, with a 50-bp cut in the Selic rate.
Later tonight, we will publish a more in-depth report on the Copom’s decision.
The breakdown shows that the increase was driven both by the current conditions and the expectations component.
The breakdown shows that the increase was driven both by the current conditions and the expectations component.
Despite the decline, the final indicator printed better than the preview released last week.
Despite the decline, the final indicator printed better than the preview released last week, when industrial confidence fell by 1.7 p.p.
See our Week Ahead full note at the end of this report.
Confidence in the sector accelerated further from June, but remains at pessimistic levels.
The breakdown shows that the increase was driven both by the current conditions and the expectations component.
Despite the acceleration, the current level of formal job creation is consistent with a still-timid 1.0% GDP growth, in year-over-year terms.
The Economic Policy Secretary, Adolfo Sachsida, stated that this measure may increase GDP by 0.35% between 2019 and 2020
Although small, the drop halts the recovery trend seen in June, when confidence indicators from almost all sectors registered increases.
Weak consumer confidence, labor market, and lower global growth make us believe a meaningful and durable activity acceleration this year is unlikely.
After the release of today's result, we revised slightly our estimate for the headline IPCA in July to 0.20%.
The low level of confidence is consistent, in our calculations, with a 0.4% qoq/sa decline of industrial production in the month.
With the result, confidence in the industrial sector continues to show no signs of a rebound.
Looking forward, we expect the policy rate to reach 2.0% by yearend, with the next cut likely in September.
See our Week Ahead full note at the end of this report.
We expect stable rates at this meeting
Pessimism has reigned for consumers in 9 of the last 10 months.
Pessimism has reigned for consumers in 9 of the last 10 months.
Moderate disinflation will likely continue in July.
Both BCB and Itaú's monthly GDP indicators increased in May.
Consumer prices decelerated for the third consecutive month in June.
Both BCB and Itaú's monthly GDP increased in May.
Now, the second round of voting is very likely to take place only in August.
On Wednesday, the House concluded the first round of voting on the base text, with 379 votes in favor and 131 against the proposal.
See our Week Ahead full note at the end of this report.
Last night, the House concluded the first round of voting on the base text, with 379 votes in favor and 131 against the proposal.
The plenary started to analyze the highlights, and, possibly later this week, will move on to the second round of voting
The Lower House is currently analyzing the requirements and, once this step is completed, the plenary will be able to vote the main text.
According to local news, the Lower House is set to begin in the next hours the first round of voting on the pension reform.
Downbeat private sentiment amid an uncertain global scenario justify our 2.4% growth call for this year.
Given our outlook of a growth slowdown this year, we do not expect a notable acceleration of inflation.
See our Week Ahead full note at the end of this report.
The Lower House will probably start to analyze the proposal on Tuesday
It will be important to monitor how these steps will evolve, in order to gauge the timing of the first Lower House floor vote.
The committee is now voting on the amendments, which might be concluded today
After this result, our GDP tracking for 2Q19 increased slightly, to 0.3% qoq/sa (from 0.2% previously)
For 2019, we see GDP growth of 2.4%, down from 4% in 2018
Industrial production declined 0.2% mom/sa in May.
We forecast a 0.6% decline on seasonally adjusted terms.
The median of the Selic rate expectations declined to 5.50%, from 5.75%.
Seasonally adjusted, the unemployment rate slid 0.1 p.p. to 11.8%.
See our Week Ahead full note at the end of this report.
This result goes in line with the rebound also registered in the consumer, retail and construction confidence indicators in the period.
The 3-month moving average decreased to 13k, from 26k in the previous month.
The print is broadly in line with the preview released last week, in which industrial confidence fell 1.4 p.p.
The risks are still tilted to the downside, given ongoing adjustments and uncertainties regarding the outcome of the upcoming presidential election
Both retail and construction confidence indicators registered increases in June.
The minutes reinforce our call that the Copom will resume easing in July, conditional on concrete progress in the reform front.
This increase interrups a series of four consecutive drops
We expect economic activity to decelerate to 1.0% in 2019, from 2.0% in 2018.
We will learn more about the authorities´ views with the release of the meeting minutes at 08:00 AM on Tuesday, June 25
In our view, a widening output gap (we see growth at 2.6% this year) and controlled inflation would likely lead the central bank to cut rates
We believe that the Copom will maintain the Selic rate stable at 6.5% per year
The Copom decision to leave the base rate unchanged at 6.5% pa was widely anticipated.
The year-end Selic rate for 2019 declined 75 bps to 5.75%
We believe that the Copom will maintain the Selic rate stable at 6.5% per year.
According to the Focus survey, the median of Selic rate expectations declined 75 bps from its current level.
See our Week Ahead full note at the end of this report.
Considering the report, we estimate fiscal savings of BRL 930 bln in 10 years
Compared to the same month of 2018, the index declined 0.6%.
The rapporteur Samuel Moreira is expected to present the full report to the Lower House Special Committee today, at 9:30 AM
According to the rapporteur, the fiscal impact estimate of the proposal after the changes amounts to BRL 913 bn in the next ten years.
Broad retail sales remained stable (seasonally-adjusted) in April, weaker than market expectations and our forecast.
At the margin, industrial production improved, but momentum remained moderate.
The board’s working assumption going forward is for stable rates for the following quarters
At the margin, industrial production improved, but momentum remained moderate.
See our Week Ahead full note at the end of this report.
Elements justifying the largest rate cut in a decade include the activity outlook downgrade, higher potential growth and lower estimated neutral rate.
See our Week Ahead full note at the end of this report.
Weak public investment, associated to a transition effect between administrations, will probably affect construction investment in the short-term
Activity in the primary sector is expected to improve ahead but we see clear downside risks to our 3% growth outlook.
According to calendar adjusted figures, gross fixed investment fell sharply in March.
Our preliminary forecast for May’s industrial production is a 2% mom/sa decline
The monthly GDP proxy (Imacec) increased 2.1% yoy in April, in line with market consensus and a tick above our 1.9% call.
The 3-month moving average rate with seasonal adjustment declined 0.1%.
The increasingly complex external scenario is resulting in growing domestic uncertainty.
Retail sales (including vehicles) fell 0.8% over twelve months in the period, below the market consensus (-0.6%) and our forecast (-0.3%).
See our Week Ahead full note at the end of this report.
For 2Q19, our preliminary forecast is a modest GDP growth of 0.1% qoq/sa.
The national unemployment rate reached 12.5% in April.
We forecast a 0.2% qoq/sa decline, leading to 0.4% growth in year-over-year terms
GDP declined 0.2% qoq/sa in 1Q19.
Confidence across all sectors decreased in the month, which indicate no substantial acceleration in economic activity ahead
The NPL ratio remained unchanged at 4.7% for consumers and declined to 2.7% for businesses (from 2.8%).
Data released so far for 2Q19 indicate no substantial acceleration in economic activity ahead, after a disappointing 1Q19.
Data released so far for 2Q19 indicate no substantial acceleration in economic activity ahead, after a disappointing 1Q19.
The negative result was driven both by the expectation and current situation components.
Although all members agreed to maintain the rates stable at 3%, several stated that a neutral stance justified discussing all possibilities.
Using our seasonal adjustment, formal job creation increased to 50k in April.
Declines were observed in industrial, consumer and now retail confidence indicators.
The decline was driven by drops both in the expectations and current situation components.
Core CPI came in at 0.09% (from 0.13% a year ago), pressured by tradable prices, while core services decelerated.
Using calendar-adjusted data, retail sales grew at a slower pace in March.
Activity and confidence indicators in several countries from Latam will be published today, adding to the expenditure report in Brazil.
Activity data released so far for 2Q19 indicate no substantial acceleration in economic activity.
The breakdown shows a drop both in current conditions and expectations components.
Depressed private sentiment and a slowing global economy mean Chile’s growth risks are tilted to the downside.
Despite the negative print, part of the worsening of consumer confidence could be transitory.
The Board sees the recent high in inflation as transitory, and believes its policy stance is consistent with the convergence of inflation to its target.
The print was likely influenced by the weaker Colombian peso and protests that affected transportation routes and led to higher inflation.
The result marked the third consecutive monthly decline, leading the indicator to decrease 0.7% on a quarterly basis.
The Board recognizes the recent acceleration in inflation as transitory and see inflation converging toward its target with current rate levels.
According to BCB, the monthly GDP proxy index (IBC-Br) decreased 0.3% mom/sa in March.
Both our monthly GDP proxy (PM-Itaú) and service sector revenues (PMS) declined in March.
The committee indicates that, while 1Q19's GDP may well have a negative print, activity is likely to rebound after the pension reform.
The minutes suggest the Copom is still comfortable with the level of the Selic rate, but we expect the BCB to cut rates again in September.
Our LatAm Macro Monthly report was published today, featuring scenarios for Latam economies, the global scenario and commodities.
Despite some monthly upward pressure in the core services component, core inflation remains in comfortable levels.
Despite some monthly upward pressure in the core services component, core inflation remains in comfortable levels.
The print reinforces our view of weak GDP growth in 1Q19.
We’ll learn more about their thinking with the release of the minutes on Tuesday, May 14 at 08:00 AM.
For the time being, we anticipate seasonally-adjusted declines in both retail sales indicators in April
Uncertainty over the direction of domestic policy and the approval of the USMCA by the U.S. Congress will continue to weigh on investment in the short-term
We’ll learn more about their thinking with the release of the minutes on Tuesday, May 14 at 08:00 AM
We believe that the central bank will remain on hold throughout the year
Gross fixed investment came in above expectations in February.
Activity in the first quarter of 2019 grew at its slowest pace since 2Q17.
We expect the Copom to maintain the Selic rate at 6.50% in its next monetary policy meeting.
We expect the Copom to maintain the Selic rate at 6.50% in its next monetary policy meeting.
March's industrial production will also be released today.
Next week, Copom, inflation and activity data on focus.
The EMAE (official monthly GDP proxy) printed the third consecutive increase in February.
For April’s industrial production, our preliminary forecast points to a 0.9% mom/sa decline.
With these results, the week was marked by weak results in confidence indicators among broadly all sectors.
Despite the improvement, the indicators still reflect a slow-paced recovery of the labor market in the first quarter of the year.