Halister News

(Bloomberg) -- New BCB President Ilan Goldfajn’s economic views are well known; other than being responsible for Itau’s reports, Goldfajn has written regular commentaries for Globo and Estado newspapers, including one in April that said “this is not the time” for FX “euphoria.”

• Following are some of Goldfajn comments from the “Euphoria Amid Crisis” article published in Estado on April 5:
• FX: “This is not the time to allow FX appreciation. This is the time to go against the tide, buying USD (by cutting BCB’s outstanding FX swap position), since the market wants to unwind it. It is not a moment to allow market euphoria, which comes from a temporary international context, tied to fragile local optimism, based on very uncertain scenarios, with significant difficulties of implementation. BCB is correct to act in the opposite direction”
• Inflation: “Amid the absence of extreme policies, the most likely scenario is that inflation keeps dropping. We have already seen current inflation drop and short-term price expectations signal a continuation in the near future”
  • “The reason for disinflation is simple: there aren’t inflationary forces in the system. The worst recession in history - and the consequent strong drop of sales - removed the capacity of the economy to adjust prices”
• Rates: “At a certain time, probably still sometime this year, BCB should reduce interest rates, confirming the trajectory of dropping inflation. But there is no case to cut rates immediately (in the 1st half) to avoid allowing exaggerated optimism in the market. It is important to assure that disinflation comes first”
• NOTE: Goldman Sachs in a e-mailed note said that the new appointments to Brazil’s economic team bring to the Temer administration “respected, well-trained technocrats with very rich and valuable experience in both the private and public sectors”