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Non-Tech : The Brazil Board -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (832)	3/16/2012 4:44:54 AM
From: elmatador	Respond to of 2508

Brazil rates: doves dressed as hawks and how they do not know to translate Brazil. Brazil rates: doves dressed as hawks March 15, 2012 11:23 pm by Samantha Pearson Ask football players on opposing teams to explain the final score of the match they have just played and they will surely give different explanations for the same result. It is worth bearing in mind this logic when reading Brazil’s latest and somewhat confusing central bank minutes. Last week policymakers unexpectedly decided to cut the benchmark interest rate 75 basis points to 9.75 per cent, by five votes against two. However, the meeting’s minutes released early on Thursday seem less dovish than the decision itself, giving little explanation of why the central bank suddenly decided to speed up the easing cycle. In a preparatory note to clients, BNP Paribas provides a possible explanation for this discrepancy: One warning on the policy minutes: they may well be prepared chiefly by one of the two dissenting board members who voted for keeping the 50bp cutting pace. If so, then any relatively hawkish tone should be taken with a grain of salt, as the board overall has proven more dovish than its dissenting minority. In other words, the author of the minutes gives little justification for a 75 basis point cut because he believes quite frankly there shouldn’t have been one. However, other analysts provide a different explanation for the inconsistency between the minutes and last week’s decision. Brazil has been desperately trying to bring down its high interest rate to reduce the flow of hot money into its bond market, thereby easing pressure on its overvalued currency. The reason this justification was not spelled out in the minutes is because, technically, Brazil’s central bank should only care about inflation. This from Tony Volpon at Nomura: In our opinion these minutes are missing a franker discussion of the possible impact of the current “monetary tsunami” of liquidity on the Brazilian economy…The Copom (central bank committee) seems unwilling to abandon its outdated inflation-targeting framework in its communication, although this framework has had little influence on its decisions this cycle. No wonder then that Brazil’s currency market was in turmoil on Thursday as traders tried to figure out just which side of the story to believe.