Home Crises Signals Exchanged between main indicators of Brazilian economy

Signals Exchanged between main indicators of Brazilian economy

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Brazil’s Gross Domestic Product (GDP) grew 1.0 percent in the first quarter from the preceding one, matching economists’ forecasts for the biggest rise since the second quarter of 2013.

Yields paid on Brazilian interest rate futures rose on Thursday after the central bank said it was ready to reduce the pace of rate cuts amid a growing political crisis. Before the statement, investors had speculated the bank could even accelerate rate cuts in July to a brisk 125 basis-point pace. But that was not happened.

However  Brazil’s job outlook is worsening. Over 14 million Brazilians are out of work and the unemployment rate hit a new record of 13.6%, according to figures published this week. Before the economic crisis, it was half that at 6.5%. Unemployment should only be reduced when reforms are approved.

But the corruption allegations against President Michel Temer which could cost him his mandate have threatened to derail his agenda of structural reforms, which fueled bets on a rapid rate of policy easing.

Record high unemployment, weak growth after a historic recession and political chaos worsening as President Michel Temer is embroiled in new corruption allegations that he paid hush money to a former congressional leader now in jail. Temer denies the claims.

Although inflation has dropped, Brazil’s economy shrank 0.4 percent in the first quarter from the year-earlier period, following a 2.5 percent drop in the previous quarter. These exchanged signals keep investors cautious.