Brazil's economic condition is likely to remain weak in near term as long as political crisis weigh on investment decisions and stimulate negative tone in the financial markets. Industrial production decreased nearly 8 percent and is unlikely to reverse its negative trend. The economy's growth is likely to decline by 3 percent this year but is expected to recover moderately by next year.
With December's headline inflation coming in at 10.7 percent y/y, the central bank held its monetary tightening stance as it left the market-benchmark SELIC rate unchanged at 14.25 percent at the recent monetary policy meeting.
"We anticipate a further increase in the SELIC rate at the next COPOM meeting scheduled for March 2nd, 2016. Meanwhile, impeachment proceedings against the Brazilian president might deter the fiscal adjustment process." Says Scotiabank in a research note.