Brazil: Central Bank showing that there is light at the end of the tunnel - Wells Fargo
|According to analysts from Wells Fargo, the Brazilian economy is getting help from the Central Bank, that continues to reduced the key interest rate (Selic)
Key Quotes:
“This week’s 75 basis points reduction in the Selic benchmark interest rate and the overall 200 basis point decline in the past five months confirms that the Brazilian central bank has become an ally of the current Brazilian president as he tries to revive a moribund economy.”
“The central bank will probably continue with its campaign of lowering interest rates in the near term. An additional consideration for the central bank will be currency dynamics and how those dynamics are influenced by its interest rate actions. For now, our sense is that the central bank is not particularly worried that its interest rate easing will lead to excessive currency weakness, though it continues to monitor trends closely.”
“After two years of going through the worst recessionary period in Brazilian recorded history, the central bank is showing that there is light at the end of the tunnel. We still believe that the recovery will take time and will not be very strong, but weak growth is always better than what has happened during the past two years.”
“The country is not out of the woods yet as it still has to fix its fiscal accounts and the road ahead is not devoid of social and political problems. However, if the economy starts to rebound the political environment and the fiscal situation will probably start to improve, which is no small feat for such a battered economy.”
“What could help the Brazilian economy considerably would be a stronger global economy, which is not a sure thing today even though we have seen some improvement at the global stage.”
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