6 Aug 2015
Brazil could remain ‘on hold’ until H2 2016 – Rabobank
FXStreet (Edinburgh) - Christian Lawrence, Strategist at Rabobank, believes the Brazilian central bank could refrain from acting on its monetary policy until H2 2016.
Key Quotes
“S&P shifted its outlook for Brazilian debt denominated in foreign currency from stable to negative on July 28”.
“Brazil is rated at BBB-, the last score before the “junkyard”. Fitch and Moody’s still rate the country one notch above S&P’s rating. S&P estimates that the likelihood of a downgrade to junk is now more than one in three”.
“Poor economic growth and a primary balance close to zero will put debt sustainability under doubt in upcoming years”.
“The MPC also made an important announcement this month as it decided to end the tightening cycle on July 29 with a final hike of 50bps, leaving the SELIC rate at 14.25%. In our view, the Bank is likely to keep the SELIC at 14.25% until 2016H2”.
Key Quotes
“S&P shifted its outlook for Brazilian debt denominated in foreign currency from stable to negative on July 28”.
“Brazil is rated at BBB-, the last score before the “junkyard”. Fitch and Moody’s still rate the country one notch above S&P’s rating. S&P estimates that the likelihood of a downgrade to junk is now more than one in three”.
“Poor economic growth and a primary balance close to zero will put debt sustainability under doubt in upcoming years”.
“The MPC also made an important announcement this month as it decided to end the tightening cycle on July 29 with a final hike of 50bps, leaving the SELIC rate at 14.25%. In our view, the Bank is likely to keep the SELIC at 14.25% until 2016H2”.