In the third week of April, the Central Bank’s Monetary Policy Committee released the minutes from its last meeting, inflation came below expectations and CAGED data showed further job losses for the Brazilian economy
The fall in current and forecast inflation rates created space for the intensification of cuts to the basic interest rate
The minutes of the last meeting of the Monetary Policy Committee (Copom) showed inflation remains under control and disinflation has been widespread in recent months. In addition, there was a decline in inflation forecasts for 2017, from 4.4% at the last meeting to 4.1% currently. For 2018, inflation is expected to stay around 4.5%.
According to the Focus Report, the market forecasts for the Extended Consumer Price Index (known as the IPCA) will reach 4.06% this year, as opposed to the previous estimate of 4.09% – the sixth consecutive decrease. By the end of 2018, inflation is projected at 4.39% in contrast to the 4.46% pencilled in last week. This is still higher than the inflation projection cited in the first quarter inflation report (which was 4.0%).
The above elements will allow the Central Bank to intensify the depth of interest rate cuts, from 75 basis points (bps) in February to 100 bps in April.
There was also a surprise discussion in the minutes surrounding a debate about the further intensification in the pace of monetary easing. However, in the Copom’s evaluation, this was not feasible due to the prospective character of monetary policy and uncertainties and risks inherent in the Brazilian economy.
“Committee Members considered the degree of front-loading desired to the current cycle. On the one hand, they argued that the evolution of the economy would allow for an increase monetary easing greater than that decided at the meeting, On the other hand, members of the Copom argued given continued uncertainties and risk factors, it would be more appropriate to maintain the pace of the last meeting.”
– Central Bank’s Monetary Policy Committee minutes
Brazilian inflation preview falls to its lowest level since 2006
The IPCA-15 increased 0.21% in April after a 0.15% increase in March and a 0.51% in April 2016. This is the lowest rate of inflation for the month of April since 2006. In the 12-month measure, the index decreased from 4.41% from 4.73% in the previous month.
Underlying inflation data remains favourable. The three-month moving average of cores inflation, seasonally adjusted and annualised, increased by 3.1% in April, from 3.2% in March. Service inflation showed a slight uptick in 12 months, rising to 6.2% from 6.0% in the previous month.
Brazil lost 63,624 formal jobs in March according to Caged data
There were 63,624 formal jobs lost in March according to data from the General Register of Employed and Unemployed (Caged) recorded by the Ministry of Labour. In the same month of last year, the decrease was 118,000 jobs.
The negative result came on the heels of the February result when 35,612 jobs were created, a break in the 22 consecutive months of decline.
Retail suffered the most with a stiff contraction in March (-33,909 jobs), followed by services (-17,086 jobs), construction (-9,059 jobs), manufacturing (-3,499 jobs) and agriculture (-3,471 jobs).
That was last week, but let’s not dwell on the past, make sure you click here to see what is happening in the last week of April.