Brazil Said to Have No Ceiling for Rate Increases

Rate increases are not hurting economy as Selic rate isn’t above theoretical neutral rate for Brazil, a person close to govt’s economic team says.

  • It’s far too early to even think about rate cuts, the person adds, asking not to be named because discussions are not public
  • A drop to 4.5% in end-2016 inflation expectations should be an absolute prerequisite to start cutting rates, the person says
  • Other circumstances must be aligned for rates to start being cut, the person adds
  • Fiscal measures and budget freeze make Copom inflation target more easily reachable, according to the person
    • Monetary and fiscal policies are aligned
  • Economy expected to improve 2H15
  • There’s pent-up spending by businesses waiting to be put into the economy, the person says
  • Services number, composition of 1Q GDP seen encouraging
  • Central bank press office says the bank do not comment on information when the person isn’t identified
  • NOTE: Earlier, Brazil Economy Shrinks Less Than Estimated in First Quarter
  • NOTE: May 27, Rousseff Wins Austerity Breakthrough as Brazil Caps Pensions
  • NOTE: May 22, Brazil Freezes $22.6 Billion in Spending After Raising Taxes

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