Don’t anyone accuse Brazil’s central bank of not being bold.
In a unanimous decision, the bank cut its policy interest rate by 75 basis points on Wednesday, exceeding the consensus call for a 50bps cut and sharply picking up the pace on an easing cycle it began with two back-to-back cuts of 25bps each in October and November
In a statement, the bank said economic activity had fallen below expectations and that a recovery would take longer than previously anticipated.
It also noted data released earlier in the day showing inflation falling faster than expected to 6.3 per cent in the year to December 31 – the first time in two years it has been within the central bank’s target range of 4.5 per cent plus or minus 2 percentage points. Market economists expect it to end 2017 at 4.81 per cent, according to the central bank’s latest weekly survey.
The size of the cut will be welcomed by many, given the economy’s stubborn refusal to return to growth. The rebound expected by many when congress ditched president Dilma Rousseff last year has failed to happen. GDP contracted by 8 per cent over the past two years under Rousseff’s watch; her pro-growth, market-friendly successor, Michel Temer, was expected to turn things round quickly.
World Bank’s latest Global Economic Prospects report … headlines:
Forecasts global real GDP growth at 2.7% in 2017 vs 2.3% in 2016
Forecasts advanced economies’ growth at 1.8% in 2017 (vs 1.6% in 2016)
Emerging/developing economies’ growth at 4.2% in 2017 (3.4% in 2016)
Forecasts US growth at 2.2% in 2017 (vs 1.6% in 2016) … they say their forecast excludes effects of any policy proposals from trump administration
Challenges for emerging market commodity exporters are receding, while domestic demand solid in emerging market commodity importers
Fiscal stimulus in US could generate faster domestic and global growth, but extended uncertainty over policy could keep global investment growth slow
Forecasts China’s growth slowing to 6.5% in 2017 (from 6.7% in 2016)
(Headlines via Reuters)
The World Bank looking at the recovering oil and commodity prices, noting this eases the pressures on emerging-market commodity exporters. Expects the recessions in Brazil and Russia to end.
As always the Bank notes uncertainties in its forecasts (all forecasters should), with upside uncertainty (in the short term at least) on US potential increased fiscal stimulus, tax cuts, infrastructure spending. Looking further out, though, a surge in debt load, higher interest rates & tighter financial conditions would have adverse effects.
Also downside potential on a more protectionist trade stance.
Venezuela’s embattled President Nicolás Maduro on Sunday hiked the minimum wage by 50 per cent in another hapless attempt to face a festering economic crisis teetering on hyperinflation. “To start the year, I have decided to raise salaries,” he said on his weekly broadcast. This is one of many increases over the last year.
With the hike, a Venezuelan worker will earn 40,683 bolívars a month. This is $60 a month at the weakest legal exchange rate, or roughly $12 a month at the black market exchange rate. That, alongside a hike in a mandatory food subsidy, brings the total minimum wage to 104,358 bolívares, or $31 at the unofficial rate.
According to calculations by Reuters, this means Mr Maduro has raised the minimum salary by a cumulative 322 percent since February 2016. But critics argue this will do nothing for impoverished Venezuelans to alleviate the dual perils of food shortages and galloping inflation forecast by the IMF to top four digits in 2017.
Inflation reached 181 per cent in 2015, according to most recent official data released over a year ago. Meanwhile, the annual general level of inflation in December 2016 was 290 per cent, according Steve Hanke, a hyperinflation expert at the Cato Institute, a think tank, and professor at Johns Hopkins University.
Yes, I know it’s Dec data but it’s the first release in 2017
It’s nearly time for the most exciting data point of the month.
Here’s a run down of the numbers;
NFP expected in at 178k Reuters, 175k BBG BBG hi est 221k BBG Lo 125k Nov 178k Average hourly earnings 0.3% exp vs -0.1% prior m/m 2.8% exp vs 2.5% prior (that’s a pretty high expectation) The top 5 NFP callers are thus;
Jim O’Sullivan – High Frequency Econ – 155k Ryan Sweet – Moody’s – 180k P de Bruin/M Cabezas ABN Amro – 185k Stephan Buu CTI Capital – 162k Robert Dyer – Comerica – 163k
The Indian economy is expected to grow at 7.1 per cent this fiscal, according to an official advance estimate for the year released on Friday, compared with actual expansion of 7.1 per cent in the first six months of 2016-17. According to the estimate of national income for 2016-17 released by the Central Statistics Office (CSO), the country’ gross domestic product will grow at 7.1 percent in 2016-17 compared to 7.6 per cent in 2015-16.
The anticipated growth of real GVA (gross value added, which excludes taxes and subsidies) in 2016-17 is 7 per cent against 7.2 per cent in 2015-16, said an official statement.
Going by the parameters used for the advance estimate, the impact of demonetisation has not been considered in the forecast.
Details of the November 2016 Eurozone PPI data report 5 January 2017
0.1% vs -0.1% exp y/y. Prior -0.4%
This data is lagging so we should expect to see Dec’s numbers jump, much like we did the inflation numbers in Europe this week. On the month, consumer goods prices remained soft. We can see from the year on year details where the price pressure is going to come from. Energy was down 8.7% back in June and that’s being undone at a rapid pace.