Brazilian President Michel Temer, fighting for survival over corruption allegations, is planning new measures to jump start a stalled economy, like steps to relieve indebted consumers and forcing credit card companies to pay businesses faster.
Brazil's Senate is also expected to give final approval today on a proposed constitutional amendment tying public-spending growth to previous-year inflation.
Some economists had expected a 50 basis point cut in the Selic rate to 13.5%, but the central bank opted for a 25 basis point move. Nevertheless, a cycle is underway, as this is the second rate reduction in two months.
Prior to October's move, there hadn't been a rate cut in four years.
Giving room for the central bank to move is a noticeable slowing in inflation - to 7.9% in October from nearly 11% at the start of the year (the target is 4.5%).
Then there's the economy - expected to contract 3.5% this year after shrinking 3.8% in 2015.
Brazil has been plunged into a fresh bout of political uncertainty after lawyers for former president Dilma Rousseff presented evidence suggesting her successor, Michel Temer, accepted bribes from a construction company.
If the court rules that occurred, it could reverse her entire ticket's win. That would mean Temer, a member of the Brazilian Democratic Movement Party, would also be removed from office.
Brazil's lower house of Congress has approved a landmark proposal to cap public spending, a major victory for President Temer's efforts to regain market confidence and pull the economy out of its worst recession ever.
Separately, corruption charges against former President Lula da Silva are piling up as prosecutors accused him of an alleged bribery scheme related to contracts in Angola. If found guilty, he could face up to 35 years in prison.
The judge overseeing the investigation into the colossal scandal surrounding Brazil's Petrobras (NYSE:PBR) has accepted corruption charges against the nation's iconic former leader, Luiz Inacio Lula da Silva.
Plagued by scandals, his leftist Workers' Party lost the presidency in August when the Senate impeached Lula's handpicked successor, Dilma Rousseff, in a power struggle that has consumed the political establishment.
Brazilian prosecutors today charged ex-President Luiz Inacio Lula da Silva - probably still the country's most popular politician - with being the "top boss" of a vast corruption scheme at state oil company Petrobras (NYSE:PBR).
The prosecutor says political kickbacks had caused 42B reais ($12.6B) in losses, and personally had received 3.7M reais ($1.11M) in bribes; Lula's lawyers say the accusations are part of an effort to stop him running in the 2018 election.
The two-year-old Operation Carwash investigation has uncovered how political appointees named by Lula's Workers Party and its allies handed overpriced contracts to engineering firms in exchange for illicit party funding and bribes; the probe helped propel last month's impeachment of Lula's chosen successor, Dilma Rousseff, on unrelated charges of breaking budget rules.
"There is ample room for foreign and domestic long-only investors to add to Brazil equities," says JPMorgan strategist Pedro Martins. "There is no doubt the investment thesis becomes simpler: lower political risk, falling interest rates and cyclical economic recovery.” His three themes:
Exposure to high-beta stocks, among them Itau Unibanco (NYSE:ITUB).
Position for declining intrest rates, also a boon to ITUB.
Alignment with the cyclical domestic recovery - maybe a strange recommendation given that GDP is expected to grow just 0.7% next year. But that's coming from negative 3.6% in 2016 - a pretty large "delta," says Martins.
“My conscience is clear," she tells lawmakers turned judges. "I did not commit a crime.” She says the impeachment process has worsened the country's recession, and calls interim President Michel Temer a "usurper." Brazil, she says, would not have elected someone who picked a Cabinet of all white men in a country more than 50% non-white, she adds.
The Senate votes on Rousseff's fate either tomorrow or Wednesday. Meanwhile, there's plenty of economic news coming this week, including Q2 GDP, August wholesale inflation, and government budget numbers. The central bank meets Wednesday and is expected to hold its benchmark rate steady at 14.25%.
The Brazilian real (NYSEARCA:BZF) continues to move higher, up 0.6% today and 22% for the year. The Bovespa is up 1.8% this session.
Brazil's impeachment trial on Saturday advanced toward its final stage, after three days of witness testimony deepened divisions among senators debating whether to permanently remove President Dilma Rousseff from office.
Lawmakers are expected to hold a final vote Tuesday or Wednesday next week, which will result in her ouster if they muster at least a two-thirds majority, as is widely expected.