Weekly agenda: Brazil’s Central Bank, rates in Colombia, and bidding in Argentina

RIO DE JANEIRO, BRAZIL – A week full of data and definitions in financial matters in the region will begin. In Brazil, the central bank will publish its inflation report for the second quarter, as well as fiscal and labor market data for May and the trade balance for June.

In addition, the Congress of Latin America’s leading economy may debate an amendment to allow the government to break the spending limit while President Jair Bolsonaro prepares to announce a temporary increase in transfers to low-income households and grant a diesel bonus to truck drivers.

Meanwhile, in Argentina, the focus will be on an ARS 248 billion (US$2 billion) public debt tender. Argentine bonds in local currency have been plummeting, and the government must redirect the situation to obtain financing in the market and not have to resort to more issuance.

In Colombia, it will be known if there will be a rate increase. Economists Adriana Dupita and Felipe Hernández of Bloomberg Economics expect the Colombian central bank to accelerate its tightening cycle and increase the monetary policy rate by 150 basis points to 7.5%.

“Rising inflation concerns and tighter global financial conditions support more decisive action,” Dupita and Hernandez said.

In Chile, activity data for May will be released, and Dupita and Hernandez expect the negative trend to continue. Peru will also release June inflation (Dupita and Hernandez expect the upward trend to continue), and Mexico will release its May trade balance.
Brazil

Brazil’s unemployment rate for May will be released on Thursday, June 30. Analysts at Bloomberg Economics expect a slight improvement here.

Brazil will release its budget balance for May on the same day. Dupita and Hernandez believe that the first primary deficit since July 2021 will be recorded.

On Thursday, the Central Bank of Brazil will publish its inflation forecasts for the second quarter. Initially scheduled for June 23, the report may bring new discussions on the factors behind persistent inflation and inflation expectations, as well as updated estimates for neutral interest rates and the output gap.

Finally, Brazil’s trade balance for June will be released on Friday, July 1. Analysts at Bloomberg Economics project another “mammoth surplus, driven by strong seasonal exports and high commodity prices.”

MEXICO

Mexico’s trade balance report for May is released on Monday, May 27.

According to estimates by Dupita and Hernandez, the trade balance probably registered a deficit of US$1.16 billion in May.

The result would compare with a gap of US$1.88 billion in April and a surplus of US$387 million a year earlier.

Lower imports should explain the monthly difference. Higher imports explain the year-on-year variation.

ARGENTINA

On Tuesday, June 28, the Treasury peso bond tender will be held, in which the Minister of Economy, Martín Guzmán, will appeal to the market for help to finance the fiscal deficit.

Meanwhile, on Thursday, June 30, the economic activity index for April will be published.

“We expect activity to recover the ground it lost in March. Previous data showed a 5% monthly increase in industrial production and a 5.4% advance in construction activity,” wrote Dupita and Hernandez.

COLOMBIA

On Thursday, June 30, the Central Bank of Colombia will hold its Monetary Policy Meeting. Dupita and Hernandez expect the central bank to raise its benchmark rate by 150 basis points to 7.5%, although they clarify that a larger move is possible. They also believe that the door will remain open for further moves.

CHILE

On Thursday, June 30, the retail sales report for May in Chile and the industrial production index for the same month will be published.

The highlight will come on Friday, July 1, when the economic activity data for May is released. Dupita and Hernandez wrote that economic activity likely rose 5.3% in May from a year earlier after a 6.9% advance in April.

However, analysts at Bloomberg Economics argued that the result implies a small monthly decline, with activity still well above its potential level before the pandemic.

“Higher interest rates, lower government transfers, and waning support from pension savings withdrawals are headwinds. High inflation and political uncertainty are a drag,” they added.

PERU

Peru’s Consumer Price Index for June is released on Friday, July 1.

According to analysts at Bloomberg Economics, inflation is likely to have risen to 8.13% in the sixth month of the year from 8.09% in May, with lower non-core inflation due to government subsidies and base effects offsetting higher inflation elsewhere.

Thus, it will remain well above the target ceiling of 2.0% +/- 1 percentage point.

With information from Bloomberg