An Intense Monetary Easing Will Continue
With the start of the political crisis, it soon became apparent that from the standpoint of inflation two forces acting in opposite directions had been generated. By retarding resumption of growth, the crisis would accentuate disinflation, but by raising the risks and thus discouraging the capital inflows, it could depreciate the real, with an inflationary effect. Since a priori it was impossible to know which of these two forces would predominate, the Central Bank opted to wait for developments. As things have turned out, because of the continuing high trade surpluses and the lower risk aversion in the international financial market, favoring capital flows to emerging markets, including Brazil, the real has remained relatively stable, while it has become ever-clearer that economic recovery will be very slow. Hence, the disinflationary forces have prevailed, as reflected in the IPCA results for June, and the scenario continues to favor aggressive cutting of the SELIC rate.
Now read on...
Register to sample a report