Brazil’s economy ended the first half of the year on better-than-expected footing according to the central bank’s main gauge of activity, as demand proved uneven weeks before the start of key rate cuts.
(Bloomberg) — Brazil’s economy ended the first half of the year on better-than-expected footing according to the central bank’s main gauge of activity, as demand proved uneven weeks before the start of key rate cuts.
The bank’s economic activity index, a proxy for gross domestic product, rose 0.63% in June from the prior month, slightly more than the median estimate of 0.50% from analysts in a Bloomberg survey. From a year ago, the gauge increased 2.1%, according to data published on Monday.
Policymakers led by Roberto Campos Neto are trying to engineer a soft landing for Latin America’s largest economy as they start to lower the key rate from a six-year high while still keeping an eye on inflation. With consumer price prints proving “a little bit” better, central bankers signaled they intend to continue loosening monetary policy at a pace of 50 basis points during the next few months, assessing whether cost-of-living increases will slow toward target.
Read more: Brazil Central Bank Says Faster Key Rate Cuts Are Unlikely
Industrial production inched up 0.1% in June while retail sales were unchanged, indicating activity was subdued in the weeks before the start of the easing cycle in August. Still, analysts raised their 2023 economic growth estimates to 2.29%, according to a central bank survey published earlier on Monday.
Meanwhile, annual inflation picked up last month, nearing 4%, as the impacts of last year’s tax cuts fade away. Price pressures in the services sector — now a key focus for the central bank — have showed improvement, while core measures excluding energy and food are slowing.
Read More: Brazil’s Inflation Tops Estimates as Key Rate Starts to Fall
President Luiz Inacio Lula da Silva has been pressuring for looser monetary policy for months in hopes of boosting the economy. Top cabinet members are also pushing Congress for a final approval in a tax reform and a bill to shore up public finances, both likely to facilitate further rate cuts and improve the growth outlook.
–With assistance from Rafael Gayol.
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