Halister News

(Bloomberg) -- A broad Brazilian price index shows some signs of inflation relief, which may help BCB build a case to start cutting rates in Oct., Newton Rosa, chief economist at SulAmerica Investimentos Dtvm, says in a phone interview.

• NOTE: July IGP-10 -0.27% vs est. -0.25% (prior 1.06%); producer agricultural prices -1.66%; industrial prices -0.11%
  • Sao Paulo CPI from Aug 15 slowed more than expected to 0.05%
• Along with reversal of a rise in food costs, the drop in producer prices reflects the recent positive impact of BRL gains, says Rosa, who was among the economists with closer estimates to the effective results of the data released today
• If the trend continues and is also reflected in the official IPCA price index, BCB may start cutting in October with a 25bps drop, Rosa says
• NOTE: Traders in swap market project at least one cut by December
• BRL gains in prior months failed to help ease Brazil’s inflation given the shock of government-monitored prices such as energy, which raised company costs, according to Rosa
  • Market optimism regarding the Temer government depends on how well reforms advance after impeachment vote, which is expected to start next week, and municipal elections in October
  • “It will be an end to investors’ honeymoon with Temer. The excuse that market is currently giving for the hurdles which government is facing before the impeachment will be over”
• NOTE: DI rates rise tracking BRL drop with US Fed stance