Brazil May Cut Rates Amid Confidence in Temer Eco Team: Mirae
(Bloomberg) -- Higher expectations for the economic team being set up by Acting President Temer, along with BRL strengthening, may open room for BCB to cut rates in the 2nd half, Pablo Spyer, a director at Mirae Asset Wealth Management says in as phone interview.
- Ilan Goldfajn, said to be favored pick of finmin Meirelles to head BCB, is seen as an economist that may favor rate cut, Spyer says
- NOTE: Jan 17 DI contract has dropped 226bps YTD with investors betting on a more pro-reform government
- Spyer sees 29% chance of rate cut at June BCB meeting and 87% of a decrease in July
- Other names cited as potential new central banker also will have room to cut; there’s some doubt on Afonso Bevilaqua, who is seen as more hawkish, “but even he would be a great name,” Spyer says
- Market sees names considered to form Temer’s eco. team as having ’’high credibility’’; should fiscal policy improves, there might be room for a easier monetary policy; “we will no longer need such too high rates”
- After Pres. Rousseff’s ouster yesterday, Brazil assets may become less exposed to political news and more tied to eco. fundamentals
- Investors to monitor new government ability to implement pledged reforms
- BCB interventions unlikely to avoid further BRL gains should inflows increases amid govt. shift optimism; BCB just want to curb volatility, instead of stopping BRL moves
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Pablo Spyer (Mirae Asset Global Investments)
Afonso Bevilaqua (Banco Central do Brasil)
Ilan Goldfajn (Itau Unibanco SA)
Michel Temer (Federative Republic of Brazil)
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