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Brazil Cuts Inflation Forecast: ETFs In Focus

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On Thursday, June 22, 2017, Brazil’s central bank reiterated that its monetary policy decisions remain dependent on data releases. Hence, there is a cloud of uncertainty around what course the interest rate will take in July. Brazil’s central bank revised its inflation forecasts to 3.8% from 4% for 2017 and 4.5% from 4.6% for 2018.

In its May 31, 2017 meeting, the central bank cut its key benchmark rate for the sixth straight time. It was reduced by 100 basis points to 10.25%, owing to slowing inflation. Consumer Prices in Brazil rose 3.6% year over year in May 2017 compared with a 4.08% in the previous month. The central bank expects inflation to fall to 4.3% by mid 2019, well below its 4.5% target.

The Brazilian economy has been under tremendous pressure owing to the political scandal it faces. In May, Brazil’s President Michel Temer was accused of corruption related charges. Size of rate cuts might get reduced owing to the uncertainty brought by this investigation (read: Brazil ETFs Fall as President Temer Faces Corruption Charges).

Brazil’s consumer confidence declined to 100.6 in May 2017 compared with 103.4 in April, while the business confidence index fell to 51.9 in June 2017 compared with 53.7 in May (read: Should You Buy Brazil ETFs After Brutal Sell-Off?).

Let us discuss some ETFs focusing on providing exposure to Brazilian equities (see all Latin America Equity ETFs here).