On December 11, 2019, the Brazilian Central Bank lowered the economy’s benchmark interest rate — for the fourth consecutive time. Its committee unanimously decided to reduce the Selic rate to 4.5% a year, a 0.5% percentage point cut. The move had been expected by analysts.

The benchmark interest rate is used in the negotiation of bonds in the country’s Special Clearance and Escrow (Selic) system and provides a gauge for other interest rates in the economy. It is also the central bank’s main tool to curb official inflation (Broad Consumer Price Index, i.e., IPCA).

The decision brings Selic to its lowest level since this time series was initiated by the Central Bank, in 1986.

In a statement, the bank’s Monetary Policy Committee, or Copom, said it will act cautiously and keep the rate at 4.5% a year for a long period, never failing to assess the economy’s conditions. The financial institution stressed the need to continue the structural reforms in the Brazilian economy so the rate may stay low for long.

The Selic’s historic low comes as unemployment is slowly coming down, economists are raising their growth forecasts for this year and 2020, and the outlook is for inflation to remain under control.

Many economists nevertheless expect the central bank will keep the Selic on hold at its next meeting, on February 5 (2020), while watching out for price pressures such as a recent surge in meat prices caused by higher demand in China, a major importer of Brazilian food commodities.

Original Story: Indrastra | News 
Photo: Banco Central do Brasil site
Edition: Prime Yield

Brazil’s President Jair Bolsonaro issued a draft bill late on Thursday, April 11,  proposing to formalize the independence of the country’s central bank, a move that would align the country with other major economies where those who make monetary policy are legally protected from political interference.

Bolsonaro, who took office in January, campaigned on an orthodox economic platform and had promised to cut spending and ensure the central bank’s independence.

According to the document, the bank would be governed by a board of governors with fixed four-year mandates, with the possibility of being re-elected once. The four-year terms would not be simultaneous with the country’s presidential term, which is also four years.

Original Story: Reuters | Carolina Mandl
Photo: Site Banco Central do Brasil
Edition:Prime Yield

The household credit demand will pick up in Brazil over 2019, supported by a stronger labour market, low interest rates and broadly positive sentiment, Fitch says.

In a report released last April 8^th, the rating agency maintains its view that credit growth in the Brazilian system will pick up over the coming quarters, in line with stronger economic activity. «Our core view remains that economic activity growth will rise modestly, driven by a cyclical rebound in consumption», says Fitch.

Latest figures show that Brazil’s total credit was up 5.5% y-o-y in February, led by a 9.0% rise in lending to individuals, well outpacing growth in the corporate sector.After a period of deleveraging, the household debt servicing ratio is at multi-year lows, at 19.8% overall in January and 17.4% when mortgages are excluded. While unemployment has risen in the first two months of 2019, the labour market is improving, adding a net 489,520 formal jobs in the year through February, of which 207,452 were added in January and February. Consumer sentiment is improving, in part reflecting optimism over the Bolsonaro administration’s ability to improve the economy, suggesting a stronger willingness to take on debt.

Regarding asset quality, «non-performing loans (NPL) in Brazil are likely to remain moderate over the coming quarters, benefiting from low interest rates and rebounding economic activity», Fitch forecasts. Until 2015, NPLs had steadily declined since 2012, when an economic slowdown – following a significant run-up in household debt levels – saw NPLs hit 4.0% of the total portfolio. This was largely due to an increase in non-performing credit from households. NPLs are beginning to fall, supported by improving economic growth and low interest rates. According to the rating agency, total NPLs came in at 2.9% in February.

Fitch forecasts real GDP growth will rise to 2.0% y-o-y in 2019, from 1.1% in 2018.

Original Story:Fitch Solutions | Fitch Solutions Press Release
Photo: FreeImages.com/ Afonso Lima
Edition:Prime Yield

Brazil’s central bank will take its time analysing the economic impact from an increasing number of shocks from abroad and rising political tension at home that appear to be slowing the government’s reform process, its president said.

In his first press conference as central bank chief, Roberto Campos Neto also said that volatility and uncertainty have increased lately, but noted that the current global economic slowdown is not severe enough to threaten global liquidity.

Speaking after the central bank cut its 2019 economic growth forecast to 2.0% from 2.4% in its quarterly inflation report, Campos Neto said policymakers must look through short-term market, economic and political volatility when deciding policy.

«Regarding recent shocks, the main message is inflation risks are now symmetrical, down from asymmetrical (to the upside), so we need more time,» he told reporters, noting that this signals policymakers have no bias regarding their next move.

Specifically, growth and inflationary pressures have weakened recently due to persistent slack in the Brazilian economy, a global slowdown, and rising uncertainty over domestic reforms, he added.

Campos Neto said he is confident the government’s signature plan to slash social security spending will be approved but admitted that the political environment had deteriorated recently, and market optimism has diminished.

This has slammed Brazilian markets, prompting the central bank to carry out a US$ 1 billion repurchase operation to relieve pressure on the Real. This is an “appropriate” step at the appropriate time, Campos Neto said, and does not represent a change in strategy.

Interest rate traders are almost fully discounting a central bank rate hike from the current record low 6.50% within the next year. Last week, they attached a 50-50 probability rates would be cut.

Original Story: MercoPress| News
Photo: FreeImages.copm/BrunoNeves
Edition:Prime Yield

Brazil’s Banco BTG Pactual SA expects its assets under management to grow roughly 30% in 2019, says Reuters after an interview with the banks Chief Financial Officer, João Dantas.

Net inflows to its wealth and asset management businesses were 26 billion reais ($6.94 billion) in 2018. Total assets under management reached 327 billion reais in December.

The bank forecast follows new hirings for its asset management unit earlier this month, such as former Finance Minister Eduardo Guardia to be chief executive and a veteran BlackRock Inc portfolio manager to be head of equity funds.

Asset management firms in Brazil have benefited from the country’s gradual recovery and all-time low interest rates, which tend to push investors into investments with higher fees and out of plain vanilla government bond funds.

BTG reported a 4.4% decrease in fourth-quarter recurring profit to 711 million reais on February 25^th, as expenses went up and offset higher revenues.

The bank’s total revenues rose 13% from the year-ago quarter to 1.549 billion reais, mainly driven by higher fees from asset and wealth management.

Dantas also foresaw the bank’s loan book will expand 30% in 2019, with disbursements to companies in Brazil, Colombia and Chile. Last year, it rose 32.9%, reaching 38 billion reais.

«We already see a higher demand for corporate loans and we have capital to support loan book growth,» the CFO said.

The Sao-Paulo based bank reported an annualized return on equity, a measure of profitability, of 15%, up 0.7 percentage points from the previous quarter.

Original Story: Reuters |Carolina Mandl 
Photo: BTG Pactual
Edition:Prime Yield