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2 Sep 2015
Brazil slips into technical recession - TDS
Fxstreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities notes that the Brazil has fallen into technical recession after its Q2 GDP came in below expectations at –2.6% Y/Y on a –1.9% Q/Q contraction last week as it joined the league of Canada, which also slipped into technical recession after its dismal GDP numbers were printed yesterday.
Key Quotes
“At the same time, inflation continues to run at almost 10% Y/Y rate. Despite the recently observed moderation in the inflation momentum, CPI remains too fast vs the 4.5% ± 2% target. From a macroeconomic perspective, it’s nearly impossible to find a silver lining.”
“Brazil is clearly facing one of it worst crises ever, which is made worse by the negative market reaction that keeps BRL under heavy pressure. When announcing rates today, the BCB will consider these aspects, together with the results of its regular investor surveys.”
“On the growth front, monetary policy is too tight even now. Inflation, however, requires the Bank to remain vigilant. Inflation expectations for the next 12m are now moderating, but risks continue to lean towards further tightening.”
Key Quotes
“At the same time, inflation continues to run at almost 10% Y/Y rate. Despite the recently observed moderation in the inflation momentum, CPI remains too fast vs the 4.5% ± 2% target. From a macroeconomic perspective, it’s nearly impossible to find a silver lining.”
“Brazil is clearly facing one of it worst crises ever, which is made worse by the negative market reaction that keeps BRL under heavy pressure. When announcing rates today, the BCB will consider these aspects, together with the results of its regular investor surveys.”
“On the growth front, monetary policy is too tight even now. Inflation, however, requires the Bank to remain vigilant. Inflation expectations for the next 12m are now moderating, but risks continue to lean towards further tightening.”