Brazil: April Ipca-15 Shows Slowing Inflation but Copom Flags Smaller Rate Cuts; March Primary Surplus at Record but Q1 Result Down; Pmdb Focus for Alliance

Hilfe Daily Briefing › October 19, 2009

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Summary

Given the 0.17% rise in the IPCA-15 mid-month inflation index this month, it would be surprising if the IPCA index for April fails to come in significantly lower than the 0.43% increase posted in March. If borne out, this will reinforce the outlook for inflation to remain under control, with the annual result likely to come in on target at 4.5% or just below. Despite this favourable prognosis, the minutes of the last monetary policy committee (Copom) meeting held on 18-19 April signal that the committee is likely to act "with greater parsimony" in making further reductions in the benchmark Selic interest rate, currently at 15.75% after a 75-basis point reduction on 19 April. This cautious stance may be in order to avert inflationary pressures later in 2006 and in 2007. With regard to public finances, figures for March show that there was a record primary surplus for the month but the Q1 2006 result was well below the year-earlier level. In large measure, this appears to have been due to a 14% reduction in the central government surplus, undermined by the continuing deficit on the social security account as well as the need to spend in lieu of budget funds being approved. In the political sphere, both the ruling Workers Party (PT) and the main opposition Social Democracy and Liberal Front parties (PSDB and PFL) appear set to woo the Democratic Movement Party (PMDB) as a core alliance partner in the presidential race. But before this tug of war proceeds, PMDB has to decide in the second full week of May whether it is going to field its own presidential candidate.

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Brazil: April Ipca-15 Shows Slowing Inflation but Copom Flags Smaller Rate Cuts; March Primary Surplus at Record but Q1 Result Down; Pmdb Focus for Alliance

Inflation slows in April, Copom sees 2006 target met but Selic rate cuts to ease

The mid-month IPCA-15 inflation index for April - which provides a guide to how the consumer price index for the full month is shaping up - was announced by the official statistics agency (IBGE) on 26 April. As had been expected, the IPCA-15 posted an increase of just 0.17%, considerably below the 0.37% in ...

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