Halister News

Economic Release Details: {EGBRDRAR Index ECOD} --STUART BIGGS

(Bloomberg) -- Market may end its complacency with gradual fiscal adjustments in Brazil amid uncertainties with policies of elected U.S. President Trump, Marcelo Kfoury, chief-economist at Citibank in Brazil, says in a phone interview.

• “The time Brazil has to adjust may be shortened”
• More sluggish growth may lead to an even more gradual than previously expected recovery of federal revenues, turning harder for government to cut budget deficit
  • Forecasts 0.6% GDP growth in 2017, less than market median of 1.1%
  • Market likely to continue cutting growth expectations for 2017 toward around 0%-1%, Kfoury says
• There is ’’zero chance’’ of BCB in the next meeting accelerating rate cut to 50bps vs 25bps; “the chance of a no-cut now is bigger than a 50bps cut”
  • As BRL dropped to 3.40/USD from 3.20 after Trump election, FX put upward pressure on inflation expectations, weakening the case for a more accommodative monetary policy
  • Citi now forecasts Selic rate of 11.25% at the end of 2017 vs previous estimate of 10.5%
  • Rate convergence to one digit will take longer

(Bloomberg) -- Higher financing costs add risk to government’s gradual strategy, which depends on access to external capital, Nomura analyst Siobhan Morden writes in note.

• Recommends short maturity bonds due 2019 for capital protection until external risk decreases

See {NSN OGSG6NAIBMDE } for the Government Web Content - US press release.