January’s economic activity in Brazil exceeded expectations, with a 0.9% growth in the IBC-Br index compared to December. The central bank’s interest rate stands at 13.25%, and a further hike is anticipated. Mixed economic data continues to prompt careful monitoring by policymakers.
In January, Brazil’s economic activity exceeded predictions, as reported by the central bank, just prior to an important monetary policy meeting. The IBC-Br index, a precursor to gross domestic product (GDP), experienced a remarkable 0.9% increase in seasonally adjusted terms from December, surpassing all projections in a Reuters economist poll.
The median forecast for this poll indicated a modest rise of only 0.22%, while the highest estimate suggested a 0.60% increase. Notably, on a non-seasonally adjusted basis, the index, which reflects agricultural, industrial, and service output along with tax data, recorded growth rates of 3.6% from January 2024 and 3.8% over the last year.
Since initiating a tightening cycle in September, the central bank has raised the benchmark interest rate by a cumulative 275 basis points to 13.25% in response to persistent inflation, driven by robust economic performance and a strong labor market. Market expectations lean toward a 100 basis-point hike during the upcoming policy meeting this Wednesday.
With recent fourth-quarter GDP figures falling short of expectations, the central bank’s economic director emphasized that it remains premature to determine a definitive trend of declining activity. He pointed to “mixed data” trends observed this year, highlighting strengths across various economic indicators.
In summary, Brazil’s economic performance in January surpassed expectations, driven by a notable increase in the IBC-Br index. This unexpected growth placed significant focus on the upcoming monetary policy meeting, where interest rate adjustments are anticipated in response to consistent inflation pressures. Despite mixed signals from various economic indicators, policymakers remain vigilant as they assess the situation moving forward.
Original Source: www.tradingview.com
