Those are the words of Barclay’s Marcelo Salomon.
Brazil’s economy slowed less than analysts expected in January: its economic activity fell 0.13%, while analysts expected a 0.5% decline, said Bloomberg. Near record low unemployment and rising wages are preventing Latin America’s biggest economy from a sharper slowdown.
“Economic growth may surprise on the upside in the first quarter. This means inflation pressures may resurface earlier than expected,” said Salomon.
Banco Votorantim’s Roberto Padvoani agrees, and continues: “The Brazilian economy is experiencing a paradox — weak growth and full employment. What we are seeing is a problem in industry, not a weak economy.”
Economists expect the central bank to cut its benchmark rate to 9% this year and to raise it again next year to 10%.