Brazil IPCA-15 (Nov. 2021)

The Brazilian inflation reading of 10.7% y/y in mid-November (the same as the October full month figure) provides the first sign that inflation is now stabilising. But with the headline rate still far above target and fiscal risks persisting, it looks more likely than not that Copom will raise the Selic rate in a larger 175bp step (to 9.50%) when it meets next month.
William Jackson Chief Emerging Markets Economist
Continue reading

More from Latin America

Latin America Economics Weekly

Central banks and Omicron, Colombia CA risks

The emergence of the Omicron variant presents a key risk to economic recoveries in the region, although the experience from the latest virus wave in the region provides a reason to think it will not result in a permanent hit to output. In the meantime, central banks across the region will remain focussed on tackling high inflation with further rate hikes. Otherwise, data this week showed that Colombia's current account deficit widened even further in Q3 and the recent drop in oil prices will add to the growing external vulnerabilities there.

3 December 2021

Latin America Data Response

Brazil Industrial Production (Oct.)

The surprise 0.6% m/m fall in Brazilian industrial production in October and weakness in the surveys for last month provide early evidence that the contraction in the economy last quarter may be followed by another q/q drop in GDP in Q4.

3 December 2021

Latin America Data Response

Brazil GDP (Q3 2021)

The 0.1% q/q fall in Brazilian GDP in Q3 confirmed that problems in the agricultural and industrial sectors tipped the economy into a technical recession. And with financial conditions tightening, the terms of trade worsening, and the threat from the new Omicron variant, the risks to our GDP growth forecast for next year of 1.3% are skewed firmly to the downside. Copom may temper its hawkish sentiment a bit at its meeting next week, with a 150bp hike (rather than 175bp) now looking more likely.

2 December 2021

More from William Jackson

Emerging Markets Economics Chart Book

EM tightening cycles have further to run

Inflation in the emerging world has generally surprised to the upside in recent months. But while inflation in most parts of Asia remains at levels which central banks are comfortable with, it has risen well above target in much of Emerging Europe and Latin America. Soaring energy (and in some countries food) prices explain a big chunk of the rise in headline rates, although the re-opening of economies and goods shortages have caused core price pressures to intensify too. This has prompted central banks to step on the brakes and raise interest rates, with policymakers in Brazil, Chile and Czechia in particular stepping up the pace of tightening over the past few weeks. Looking ahead, with inflation across both Latin America and Emerging Europe set to remain above central bank targets for a while yet, further rate hikes lie in store. The key exception is Turkey where, under pressure from President Erdogan, the central bank has signalled that it will ease policy again at its next meeting.

19 November 2021

Latin America Economics Update

Higher rates quickly adding to Brazil’s fiscal challenge

By next year, Brazil’s public sector interest payments could be almost twice as large (at ~8% of GDP) as they were in 2020, making the challenge of stabilising the public debt-to-GDP ratio all the more difficult.

15 November 2021

Latin America Economics Weekly

Core inflation concerns, elections in focus

The October CPI figures out of the region this week, which showed a marked strengthening of core inflation, are likely to ring alarm bells for central banks in the region and may trigger larger rate hikes in Brazil and Chile next month. Politics is likely to be centre of attention next week, with Chile’s presidential election entering the final straight, while the results of Argentina’s mid-term elections on Sunday are likely to determine the chances of a new IMF deal.

12 November 2021
↑ Back to top