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Clear
downward trend in inflation but interest rates unchanged.
Inflationary pressure remains contained. According to IBGE, consumer
prices inched up just 0.17% in the month ending 15 November, a 0.01% notch
below the consumer price increase observed in October. The FIPE
inflation data, which monitor consumer prices in São Paulo, show that
consumer prices actually declined by 0.05% in November. The decline
in prices has brought down annual inflation in São Paulo from 6.2% in
October to 4.6% in November. Despite the downward trend in
inflation, the Central Bank Monetary Policy Committee (COPOM, Comitê de
Política Monetária) left the benchmark overnight rate (SELIC) unchanged
for the fourth consecutive month at 16.5% citing the recent
Argentina-related weakening of the currency, continued high oil prices and
the government’s 19% minimum wage hike as the primary reasons for
abstaining from a further downward adjustment. Panellists are
confident that inflation will remain in check next year but still above
the Central Bank’s target of 4%. The further drop in inflation
next year is likely to enable the Central Bank to ease monetary policy by
bringing down the SELIC rate and, thus, giving further impetus to economic
growth.
Trade
balance moves to deficit as imports rise rapidly. In
November the trade balance registered a deficit for the third consecutive
month. As a result, the accumulated trade balance for this year
registered a deficit of US$ 539 million from a US$ 191 million surplus in
October. The healthy rebound in economic activity and the increase
in oil prices have substantially boosted imports. According to the
most current detailed trade breakdown from September, capital,
intermediate and consumption good imports were up 11.0%, 14.7% and 25.6%
respectively over the same month last year, while the value of fuel and
oil imports more than doubled. Export growth also remains strong as
a result of a competitive exchange rate and a favourable international
environment.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Brazil. For more details please click here.
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