Brazil: Slower GDP growth in Q4 - Rabobank

Analysts at Rabobank point out that the Brazilian assets have fluctuated relatively in line with EM peers with the BRL moving sideways (settling around 3.90/USD) – partly supported by occasional liquidity supply (via repo lines) by the BCB, amid seasonal currency outflows.

Key Quotes

“The Ibovespa stock index posted a loss for a third week, accompanying a global equity sell-off. In fixed income, the belly of the curve kept rallying (10-25bps for the week), reflecting data and events reaffirming an outlook of low interest rate for long.”

“In an eventful week, the BCB took the opportunity of the Copom minutes and Q4 inflation report to emphasize a lack of bias (or neutrality) towards upcoming policy decisions. They referred to still upwardly skewed balance of risks for inflation, highlighted caution as a policy principle, and reaffirmed the data-dependency of future moves.”

“Incoming activity data bolstered our expectation of a slower GDP growth in Q4, but also showed an improving picture in formal jobs and consumer confidence. The IPCA-15 inflation (preview) confirmed strong downward pressures in December on the back of volatile (non-core) items, with core inflation still moving far below the BCB’s mid-target.”