Halister News

(Bloomberg) -- Brazil’s central bank will choose not to accelerate the cutting pace on Wednesday decision, says Joao Pedro Ribeiro in a report, citing it as a “very real possibility” before the recent political crisis in Brazil, “that has increased risks related to fiscal reform”.

• “We continue to expect it to maintain its 100bp cutting pace”, taking the Selic rate to 10.25%
  • “The short-term economic outlook is still marked by very weak activity, falling inflation and anchored inflation expectations”
  • “In these conditions, and given the well-behaved BRL so far, the BCB is likely to opt for another 100bp cut in May, in our view, choosing not to alter its current stance amid so much uncertainty”
• Ribeiro cites “negative developments” from the reform front suggesting a combination of worse long-term fiscal outlook, upside risks to USD/BRL and upside risks to inflation expectations, reducing the scope for rate cuts
  • “Another important question is the communication regarding future movements and signals regarding the endpoint of the Selic rate
  • He sees “the most likely route” for the upcoming meetings is a deceleration of the pace, expecting a 75bp cut in July meeting
• Ribeiro maintains “for now” estimate for Selic ending 2017 at 8.50%, citing “upside risk to that level”
  • “The terminal rate is clearly tied to the developments on the reform front – where significant delays and lower chances of approval would lead to a higher endpoint”
• NOTE from May 29: Brazil House Expected to Vote on Pension Bill in June: Meirelles

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net

(Bloomberg) -- The announcement of fuel price reduction from Petrobras and Aneel’s decision on green flag might have a “notable impact” on June’s CPI, according to a report from Santander analysts, including Tatiana Pionheiro, that expects a deflation of 0.07%.

• Gasoline and diesel prices reductions were announced last Thursday by Petrobras; the fourth gasoline price adjustment in 2017 and the fifth for diesel, analysts say
• “For the IPCA, gasoline is more important than diesel, as its weighting is 3.85% (the total impact of -6 basis points in June), while diesel weighs 0.14% (total impact of less than -0.5 basis points)”
  • “We expect a lower pass-through for gasoline and diesel prices in June, thus, both tend to decrease by 1.5%”
• Brazil’s Electric Regulator, known as Aneel, announced last Friday Green Flag for June electricity prices, from Red in May
  • “For IPCA, we expect a decrease of 6.3% in the electricity tariff in June with a total impact of -23 bps”
• NOTE: IBGE to announce June data of IPCA on July 7

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Giulia Camillo

--VERONICA EK