LatAm Economic Weekly
• Brazil was downgraded yet again while Mexico surprised markets with an unscheduled rate hike.
Things to Watch Next Week
We forecast Brazil’s IPCA-15 at 1.32% mom and 10.73% yoy in February. We also expect the IGP-M at 1.20% mom and 11.98% yoy in February. In Mexico, we expect bi-weekly CPI at 0.20% and bi-weekly core at 0.13% for 1H February. We forecast the annual bi-weekly at 2.85%. We expect the annual GDP print for 2015 to increase2.5%. We expect GDP at 0.62% qoq sa and IGAE, the monthly GDP, at 3.1% yoy for December.
In Focus: demoted again
Standard & Poor’s downgraded Brazil again, lowering its rating to BB from BB+. Risks are increasing for another budget target miss, illustrating the weak economic conditions. Mexico surprised with an unscheduled 50bp rate hike, a change to its currency intervention mechanism and another round of public spending cuts. All three measures are aimed at supporting the exchange rate, and the first signs look promising with the peso strengthening almost 5% in two days. Argentina took further steps to settle its debt dispute, reaching agreements with about a third of bond holdouts. In Venezuela, President Maduro missed another opportunity by announcing economic policy measures that fall well short of what is required.
(C. Irigoyen, D. Beker, C. Capistran, F. Rodriguez, E. Aguirre, S. Rondeau; page 2)
News and Views
In Brazil, the central bank’s monetary policy director reinforced that the Selic is on hold. Also, economic activity declined 4.1% in 2015. In Colombia, retail sales and industrial production increased 0.3% and 3.9% yoy, respectively. In Mexico, further financial volatility that weakens the MXN may lead Banxico to hike. (page 5)
Today’s Market Movers
In Brazil, focus will be on the unemployment rate. In Colombia, attention will be on the overnight lending rate and the trade balance data.
iCrowdNewswire - Feb 25, 2016