By Marilia Fontes for Daily Pro (Brazil) –
We have followed during these last weeks a large risk aversion in the market. You probably heard that the stock market fell here, and interest here rose, due to the US ability to increase the interest rates.
It turned out they did not rise. Not only that, American activity data ended up surprisingly low. Consumer confidence showed a decrease, retail sales came weak, and the demand for credit also frustrated.
On Friday, revenue from taxes fell severely, indicating that the prospective scenario may be a surprise down. If people and businesses are paying less tax, most likely they are having less income (wages and profits), and would not be encouraged to hire more nor consume more.
And how does that affect us here in Brazil? Our central bank would only be willing to carry out a consistent drop in interest rates if three conditions were to materialize: (1) A local inflation slow down and falling expectations; (2) USA with neutral or expansionary monetary policy; (3) Absence of systemic risk.