LatinFocus - The Leading Source for Latin American Economies incl. Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela
LatinFocus - The Leading Source for Latin American Economies incl. Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela
 

LatinFocus

 
 
 
 
   
Latin America
 
 
 
 
 
  
Countries
 
 
 
 
 
 
 
 
 
  
Additional Links
 
 
 

 

Brazil:  Interest Rates Drop
Key indicators point toward a further pickup in economic activity towards the end of last year.  Meanwhile, the Central Bank was successful in meeting the stated inflation target for last year and has been encouraged to ease monetary policy.  The resultant decline in interest rates will provide a strong backdrop for a more accelerated growth trajectory this year.
Economic Briefing January 2001                                                                         Archive

Economy on healthy growth path.  According to the National Statistical Institute (IBGE), industrial production remained strong in November, growing 5.0% over the same month in 1999.  The strong expansion in industrial output was driven principally by 14.1% growth in the production of capital goods and offset by a 4.0% expansion in intermediate goods output.  Consumer goods production was up 3.1% over the November 1999, boosted by a 18.0% expansion in durable consumer good output whereas semi and non-durables contracted 0.4%.  Key industrial sectors driving the strong growth were mechanical (+23.2% year-over-year) and transport equipment (+17.6% yoy) as well as rubber (+20.5% yoy).  However, industrial production growth appears to be levelling off, owing to the higher comparison base last year.  While the October growth rate was slightly above the September rate of 5.3% it remained below the strong growth rates registered between June and August.  Despite the slowing of industrial production growth, panellists raised their forecast for industrial production growth in 2000.  Nevertheless, growth is anticipated to slow this year but to remain strong as a result of continued healthy export growth and a further pick-up in domestic demand.

Consumption growth strengthening.  According to IBGE, unemployment hit a 36-month low of 6.2% in November, down from 6.8% in September.  The drop in unemployment together with increased availability of domestic credit and declining interest rates continued to drive consumption during the second half of 2000.  According to the Retail Association of São Paulo (ACSP, Associação Comercial do Estado de São Paulo), retail sales as measured by debit card payments were up 11.7% in December over the same month in 1999.  Data from the Central Bank corroborates the pickup in consumption.  According to the November figures, accumulated automobiles sales grew 18.6% over the same month in 1999.

The continued healthy expansion in industrial output and the strong consumption rebound has impelled participants to maintain their positive outlook for the economy for the remainder of 2000 and this year.  This month’s Consensus remains just below the government’s 4.0% growth estimate.  A favourable downward trend in interest rates and a more competitive exchange rate are likely to further propel economic growth this year.

Central Bank lowers benchmark interest rate as inflationary pressures remain absent.  According to IBGE, inflation remains contained, despite some seasonal pressures.  In December, consumer prices rose 0.6% over November, which brought the annual rate to 5.97%, in line with the 6.0% Central Bank target.  The downward trend in inflation through the end of the year and improved prospects for lower inflation this year, driven particularly by lower oil prices and by an anticipated healthy agricultural harvest, prompted the Central Bank Monetary Policy Committee (COPOM, Comitê de Política Monetária) to lower the benchmark overnight rate (SELIC) from 16.5% to 15.75%.  Panellists’ forecasts are consistent with a scenario of lower inflation this year, which is anticipated, nevertheless, to be above the Central Bank’s 4.0% target.  The expected drop in inflation is likely to provide the conditions for further monetary easing by the Central Bank.  As a result, the SELIC rate is expected to drop further, according to this month’s Consensus Forecast.  The trend of declining interest rates is likely to be further strengthened by Standard and Poor’s decision to upgrade Brazilian sovereign ratings from B+ to BB- in early January.  The S & P statement highlights an increased confidence in the government’s fiscal management and improved inflation targeting by the Central Bank as key determinants for the upgrade.

 

Continue >>

 

©  Copyright LatinFocus 2010  |  Privacy Statement  |  Hyperlink Policy

 

Home | Profile | Contact Us | Publications | Employment
Argentina | Brazil | Chile | Colombia | Ecuador | Mexico | Peru | Uruguay | Venezuela
Latin America | News | Web Directory | Indicators | Forecasts | Release Calendar