Brazil’s Markets Eyeing Next Govt Economic Team: Analysts
(Bloomberg) -- Brazil’s FX and rates investors are likely to start focusing on the possible next central bank head and finance minister in a govt led by VP Michel Temer since impeachment of President Rousseff appears to be nearing, according to economists.
- BCB rates decisions in near future may be not defined by the current team headed by Governor Tombini and fiscal policy may be under a new finance minister, Jason Vieira, chief economist at Infinity Asset Management, says
- While recent signs of inflation easing and BRL strength could open room for rates cuts, Vieira has kept its forecast for Selic rate to be held at 14.25% for the year and BRL at 4.24 by end-2016 given economic policy uncertainty
- If Rousseff leaves and Temer picks a new economic team more strictly committed to reaching the 4.5% inflation target, BCB won’t have room to cut this year as the market is pricing it in, Vieira says
- Roberto Padovani, economist at Banco Votorantim, sees conditions for a stronger BRL if the outlook for reforms improves in a post-Rousseff scenario
- Brazil’s five-year CDS recently dropped below 400 bps after rising to as high as 500 bps earlier in the year; if the uncertainties are sorted out, the gauge may drop to 300 bps to match the average of other countries with similar ratings, sending BRL to 3.40/USD, Padovani says
- “The scenario is binary: either we overcome the political crisis and enter a more benign economic dynamics or we continue under the crisis for some years, which may lead to a more negative dynamics”
- NOTE: Meirelles, BCB governor during Lula government from 2003-2010, is among people cited across media as likely member of a eventual Temer government
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Michel Temer (Federative Republic of Brazil)
Dilma Rousseff (Federative Republic of Brazil)
Jason Vieira (Infinity Asset Management Administracao de Recursos)
Roberto Padovani (Banco Votorantim SA)
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