Inflation in Brazil climbed further out of the central bank's comfort zone in September but higher prices are not likely to prevent mor rate cuts for Latin America's biggest economy or the rest of the region.
Brazilian inflation hit an annual rate of 7.31 percent in September, more than double the rates recorded in Mexico and Chile and the highest since May 2005, data showed on Friday.
Worries about the global economy will be the main concern of Brazilian policymakers in the months ahead and inevitably push them to lower borrowing costs, analysts said.
"Inflation targeting is dead," said Edwin Gutierrez of Aberdeen Asset Management, referring to a central bank policy of tailoring monetary policy to keep a lid on price gains.
Brazil's industrial production has struggled this year, with a monthly drop in August among the weak data that might trouble policymakers more than higher prices.Despite this, Brazil's central bank surprised markets with an interest rate cut to 12 percent from 12.5 percent in August and many analysts expect more easing ahead.
"The economic backdrop is quite far from showing a benign scenario for inflation dynamics (but) we believe the Brazilian Central Bank is likely to continue easing monetary policy," said Flavio Serrano, economist with Espirito Santo Investment Bank in Sao Paulo.
Brazil is likely to cut rates by 50 basis points both this month and next, Serrano wrote, even as the inflation picture has worsened.
The Brazilian central bank has said it expects inflation to moderate and hinted last week at mild rate cuts in coming months by saying that "moderate adjustments" to the (benchmark Selic) rate are consistent with a scenario of inflation converging to the target in 2012.
In Mexico, investors are betting that the central bank will cut rates by 25 basis points by January amid a faltering recovery and weakness in the economy of the United States, the country's main trading partner .
That benign inflation picture and the risks of a global economic slowdown should push policymakers to stoke the Mexican economy with lower credit costs. Benchmark rates have been unchanged at 4.5 percent since mid-2009.
"We expect the central bank to start to preemptively add monetary stimulus to the economy before the end of the year," Goldman Sachs economist Alberto Ramos wrote in a client note.
Chile's central bank is expected to hold its key rate steady at 5.25 percent in October for a fourth month running.
Source: www.reuters.com
Brazilian inflation hit an annual rate of 7.31 percent in September, more than double the rates recorded in Mexico and Chile and the highest since May 2005, data showed on Friday.
Worries about the global economy will be the main concern of Brazilian policymakers in the months ahead and inevitably push them to lower borrowing costs, analysts said.
"Inflation targeting is dead," said Edwin Gutierrez of Aberdeen Asset Management, referring to a central bank policy of tailoring monetary policy to keep a lid on price gains.
Brazil's industrial production has struggled this year, with a monthly drop in August among the weak data that might trouble policymakers more than higher prices.Despite this, Brazil's central bank surprised markets with an interest rate cut to 12 percent from 12.5 percent in August and many analysts expect more easing ahead.
"The economic backdrop is quite far from showing a benign scenario for inflation dynamics (but) we believe the Brazilian Central Bank is likely to continue easing monetary policy," said Flavio Serrano, economist with Espirito Santo Investment Bank in Sao Paulo.
Brazil is likely to cut rates by 50 basis points both this month and next, Serrano wrote, even as the inflation picture has worsened.
The Brazilian central bank has said it expects inflation to moderate and hinted last week at mild rate cuts in coming months by saying that "moderate adjustments" to the (benchmark Selic) rate are consistent with a scenario of inflation converging to the target in 2012.
In Mexico, investors are betting that the central bank will cut rates by 25 basis points by January amid a faltering recovery and weakness in the economy of the United States, the country's main trading partner .
That benign inflation picture and the risks of a global economic slowdown should push policymakers to stoke the Mexican economy with lower credit costs. Benchmark rates have been unchanged at 4.5 percent since mid-2009.
"We expect the central bank to start to preemptively add monetary stimulus to the economy before the end of the year," Goldman Sachs economist Alberto Ramos wrote in a client note.
Chile's central bank is expected to hold its key rate steady at 5.25 percent in October for a fourth month running.
Source: www.reuters.com
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