August 12, 2019

Brazil Central Bank Is Caught Between Trade War and Weak Growth
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Brazil’s central bank will have to weigh potential price pressures from the U.S.-China trade war against prospects of a disappointing recovery when determining how long its easing cycle will last.On one hand, worsening trade tensions - coupled with Argentina’s shock primary election result - may push Brazil’s real lower and consequently dissuade policy makers from more aggressive benchmark interest rate cuts. On the other, fresh signs of weak domestic activity may pave the way for an even steeper decline in the Selic.Brazil surprised financial markets with a larger-than-expected rate reduction at its last policy meeting, joining peers from Chile to India that are also injecting stimulus. Prospects for borrowing cost cuts in Brazil were boosted by the advance of a crucial pension reform. For Bank of America Merrill Lynch chief economist David Beker, an additional 125 basis points in cuts are in store this year for Latin America’s largest economy provided its currency doesn’t steady at a weaker level."The risk to this outlook is a continued currency depreciation," Beker said. "The question is how far the exchange rate goes beyond 4 reais per dollar."Read more: Brazil Central Bank Warns of Slow Pick-Up in Economic GrowthRecent financial market turbulence laid bare how sensitive rate cut forecasts are to swings in the currency. A 2.25% plunge in the real against the dollar last Monday prompted traders to scale back bets of a second straight half-point cut at the central bank’s next rate-setting meeting in September.That drop in the real coincided with a plunge in the Chinese currency to the lowest level in over a decade, a move that provoked the ire of U.S. President Donald Trump. Relative calm just three days later led traders to reverse course and boost wagers Brazil’s central bank will lower the Selic to 5.50% next month. Still, local markets were rocked again in the aftermath of Argentine President Mauricio Macri’s landslide loss in Sunday’s primary vote which prompted fears of a spillover effect.In speeches since the July 31 rate decision, Brazil central bank President Roberto Campos Neto said the country is prepared to withstand global volatility. He cited factors including a stock of international currency reserves and a low current account deficit.Meanwhile, policy makers got a fresh reminder of the dire state of Brazil’s economy on Monday, when a key gauge of activity contracted in the second quarter. For Solange Srour, chief economist at ARX Investimentos, only an exchange rate between 4 and 4.15 reais to the dollar may cut the easing cycle short.Read more: Brazil Economic Activity Gauge Flashes Recession in New Blow"The debate surrounding monetary policy will be more tilted toward activity than the exchange rate," she said.\--With assistance from Marisa Castellani.To contact the reporter on this story: Josue Leonel in Sao Paulo at jleonel@bloomberg.netTo contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, ;Daniela Milanese at dmilanese@bloomberg.net, Matthew MalinowskiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Related Stories
Latest News
Top news around the world
Coronavirus Disease

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.

Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

Around the World

Celebrity News

> Latest News in Media

Watch It
Variety Launches Variety Intelligence Platform: VIP
April 03, 2020
lESKUjXQvDs
Everything You Need to Know About the Media Business
April 03, 2020
GBtW6QubDxM
Viola Davis on 'How to Get Away With Murder' - Variety After-Show
April 03, 2020
XnU1gziXJoc
Channing Tatum & Jessie J Have Split Again | E! News
April 04, 2020
6r7WdAH482U
Meghan Markle's TV & Film Roles Through The Years | E! News
April 04, 2020
-dGynC0Qtc8
"What a Girl Wants" With Amanda Bynes: Rewind | E! News
April 04, 2020
NP9sv0OMphM
L.A. Beachgoers & Hikers Hit the Sand, Trails Despite Beach Closures | TMZ
April 04, 2020
JtcY523mXRE
Squirrels Take Over Park in Santa Monica During California Lockdown | TMZ
April 05, 2020
Gimfz-GC1js
British Actor Adam Bond Says UK's Coronavirus Policy is Dangerous | TMZ
April 04, 2020
OqPaMfiJ_cg
Nikki and Brie Bella take us inside their closets, talk pregnancy style | Page Six Celebrity News
April 01, 2020
T9art86o6FI
Jeannie Mai and Jeezy get 'Real' about post-pandemic plans | Page Six Celebrity News
April 03, 2020
sofzhfS1By0
Is ‘Bigger’ better? BET+ sex scene review | Page Six Celebrity News
April 01, 2020
1XBLbXU1rPQ
TV Schedule
Late Night Show
Watch the latest shows of U.S. top comedians

Sports

Latest sport results, news, videos, interviews and comments
Latest Events
08
Mar
ITALY: Serie A
Juventus - Inter Milan
08
Mar
ENGLAND: Premier League
Manchester United - Manchester City
08
Mar
ENGLAND: Premier League
Chelsea - Everton
08
Mar
SPAIN: La Liga
Real Betis - Real Madrid
08
Mar
ITALY: Serie A
AC Milan - Genoa
07
Mar
ENGLAND: Premier League
Burnley - Tottenham Hotspur
07
Mar
ENGLAND: Premier League
Arsenal - West Ham United
07
Mar
SPAIN: La Liga
Barcelona - Real Sociedad
07
Mar
SPAIN: La Liga
Atletico Madrid - Sevilla
Find us on Instagram
at @feedimo to stay up to date with the latest.
Featured Video You Might Like
W3y9zuI_F64 -7qCxIccihU pQ9gcOoH9R8 g5MRDEXRk4k tudKp5Vhs3k iwWHibhssSo kQr0XHPbICM 5NeCb7JxaRk u5xQKdNqazE 56CdjlzJqSA kw7uFRs-Az0 xNv0JZWLV7w
Copyright © 2020 Feedimo. All Rights Reserved.