The Jim Bakker Show

Wave of looting shutters stores, spreads fear in Venezuela

A worker closes the security shutter of a window display at a shoes store in downtown Caracas, Venezuela January 16, 2018.

By Alexandra Ulmer and Anggy Polanco

CARACAS/SAN CRISTOBAL, Venezuela (Reuters) – A wave of looting by hungry mobs across Venezuela has left streets of shuttered shops in provincial towns and pushed some store owners to arm themselves with guns and machetes, stirring fear that the turmoil could spread to the capital Caracas.

Worsening food shortages and runaway inflation have unleashed the spate of pillaging since Christmas in the South American country, in which seven people have reportedly died.

The unrest was sparked by shortages of pork for traditional holiday meals, despite socialist President Nicolas Maduro’s promise of subsidized meat to alleviate shortages.

Looters have ransacked trucks, supermarkets and liquor stores across the nation of 30 million people, which ranks as one of the most violent in the world.

The plunder is heaping more pain on battered businesses, raising questions about how much longer they can survive. Venezuela, once one of Latin America’s richest countries, is suffering a fifth straight year of recession and the world’s highest inflation rate, which the opposition-run Congress says topped 2,600 percent last year.

In the first 11 days of January alone, some 107 lootings or attempted lootings have taken place, according to the Venezuelan Observatory for Social Conflict, a rights group.

In one of the most dramatic incidents, a mob slaughtered cattle grazing in a field in the mountainous western state of Merida.

Skeptical that authorities can protect them, shopkeepers in the Andean town of Garcia de Hevia in the neighboring state of Tachira have taken matters into their own hands.

“We’re arming ourselves with sticks, knives, machetes, and firearms to defend our assets,” recounted William Roa, the president of the local shopkeepers’ association.

Roa, who owns a restaurant and liquor store, estimated that more than two-thirds of stores in the small town near the Colombian border were shut.

“A person spends the night in each store and we communicate using WhatsApp groups, coordinating by block 24 hours a day,” he said.

In Ciudad Guayana, a former industrial powerhouse on the Orinoco river in eastern Venezuela, many stores remain closed after a wave of nighttime lootings.

Garbage fills the streets and few cars circulate, though buses crammed with people crisscross town looking for places to buy food.

Businessmen in Caracas now fear the lootings, so far concentrated in the poorer and more lawless provinces, will spread to the sprawling capital, with its teeming hillside slums.

The owners of patisserie Arte Paris, in the city’s gritty downtown, reinforced the storefront with metal shutters last month. They now only stock ingredients like sugar for a handful of days and have considered hiring a costly nighttime guard.

“The fear is real,” said Sebastian Fallone, one of the owners, as men and children begged patrons for food. “I leave at night without knowing what I will find the next morning.”

‘NO HOPE’

Government critics say Maduro’s refusal to reform the OPEC nation’s floundering economy is to blame for the chaotic fight for survival in the country home to the world’s largest crude reserves.

With a presidential election looming this year, Maduro retorts that Venezuela’s oil-reliant economy is under attack by U.S.-backed saboteurs seeking to stoke conflict and discredit socialism in Latin America.

While videos of ransacking have gone viral, Maduro’s government has stayed largely mum. The Information Ministry did not respond to a request for information on the scale and impact of the looting.

The unrest has also stoked fears Venezuelan society could unravel as chaos sets in, fuelling mass emigration to nearby South American countries or a full-blown social explosion at home.

People line up outside a supermarket with its security shutters partially closed as a precaution against riots or lootings, in San Cristobal, Venezuela January 16, 2018. REUTERS/Carlos Eduardo Ramirez

“Small-scale protests will be numerous and increasingly violent; any of these protests could contain the spark to serious unrest,” said consultancy Teneo Intelligence in a note to clients about the year ahead in Venezuela.

In an effort to curb voter anger over inflation, the government agency tasked with ensuring “fair prices” ordered some 200 supermarkets to slash their rates this month, triggering frenetic buying.

Roadside lootings have also scared truck drivers, disrupting the food distribution chain that is traditionally slower anyway in January because of holidays.

For Mery Cacua, manager of La Gran Parada, a supermarket chain in Tachira’s state capital San Cristobal, it has become too much to handle.

“We’re closing in two weeks. There’s no hope anymore,” said Cacua, adding she and her siblings had not yet mustered the strength to break the news to their 87-year-old father, who founded the business 60 years ago.

The family does not know what to do but is considering starting from scratch in Colombia.

Venezuelan supermarkets that remain open are often a shadow of what they once were. Many shelves are barren and poor Venezuelans increasingly mass outside stores, imploring entering shoppers to buy them goods.

“What are they going to loot here? There’s nothing. The warehouse is empty,” said an employee at a big supermarket in Caracas, as a colleague behind him filled empty shelves with water bottles to make them look stocked.

(Additional reporting by Maria Ramirez in Ciudad Guayana, Mircely Guanipa in Maracay, Andreina Aponte and Leon Wietfeld in Caracas; Writing by Alexandra Ulmer; Editing by Daniel Flynn and Sandra Maler)

Dollar drops on disappointing U.S. inflation data

By Karen Brettell

NEW YORK (Reuters) – The U.S. dollar weakened on Wednesday after consumer price data showed sluggish inflation, adding to concerns the Federal Reserve will be less able to execute multiple rate increases next year.

Excluding the volatile food and energy components, consumer prices ticked up 0.1 percent in November, with the annual increase in the core CPI slowing to 1.7 percent in November from 1.8 percent in October.

“The focus is on the core measure of inflation, that came in weaker than the market expected,” said Vassili Serebriakov, a foreign exchange strategist at Credit Agricole in New York.

The dollar index against a basket of six major currencies <.DXY> dropped to 93.888, down 0.23 percent on the day.

The weak data comes before a widely expected rate hike on Wednesday, when the U.S. central bank concludes its two-day meeting.

“It will probably reinforce the caution of the committee members that are concerned that the Fed is falling short of its inflation target,” Serebriakov said. “It also supports our view that the Fed will be fairly gradual next year.”

The Fed will announce its decision on rates at 1900 GMT on Wednesday followed by a statement. Chair Janet Yellen will hold a news conference at 1930 GMT.

The Fed on Wednesday may also give its strongest hint yet on how the Trump administration’s tax overhaul could affect the U.S. economy.

Investors will pay close attention to how the central bank aims to balance a stimulus-fueled economic boost with the ongoing weak inflation and tepid wage growth that has curbed some policymakers’ appetite for higher rates.

President Donald Trump’s legislative agenda may be harder to push through, however, following Tuesday’s victory by Democrat Doug Jones in the bitter fight for a U.S. Senate seat in deeply conservative Alabama.

(Additional reporting by Saikat Chatterjee in London; Editing by Nick Zieminski)

Venezuela’s January-September inflation 536 percent: National Assembly

People buy food and other staple goods inside a supermarket in Caracas, Venezuela, July 25, 2017. REUTERS/Ueslei Marcelino

CARACAS (Reuters) – Inflation in Venezuela’s crisis-hit economy was 536.2 percent in the nine months to September, largely due to the rapid depreciation of the local currency on the black market, the opposition-controlled National Assembly said on Friday.

The government stopped releasing price data more than a year ago, but congress has published its own figures since January and they have been close to private economists’ estimates.

As well as the alarming Jan-Sept cumulative rise, the legislative body – which has been sidelined by President Nicolas Maduro’s government – put monthly inflation at 36.3 percent for September, compared with 34 percent in August.

Opponents say Maduro and his predecessor, Hugo Chavez, have wrecked a once-prosperous economy with 18 years of state-led socialist policies from nationalizations to currency controls.

The government says it is victim of an “economic war”, including speculation and hoarding, by pro-opposition businessmen.

The country’s bolivar currency has weakened sharply in recent weeks on the widely-watched black market rate.

On Friday, $1 was worth nearly 27,000 bolivars on the black market, versus 22 when Maduro took power in April 2013 and 18,500 at the start of September this year.

Opposition lawmaker and economist Angel Alvarado said the government’s restriction of dollars available via official currency exchange mechanisms had pressured prices in September.

“The government strategy is only making Venezuelans poorer by the day,” he said, adding that families were now spending 80 percent of income on food.

Prices in Venezuela, which has long had one of the highest inflation rates in the world, rose 180.9 percent in 2015 and 274 percent in 2016, according to official figures, although many economists believe the real data was worse.

(Reporting by Caracas newsroom; Editing by Jonathan Oatis)

U.S. consumer spending barely rises; core inflation moderates

FILE PHOTO: New cars are shown for sale at a Chevrolet dealership in National City, California, U.S., June 30, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON (Reuters) – U.S. consumer spending barely rose in August likely as Hurricane Harvey weighed on auto sales and annual inflation increased at its slowest pace since late 2015, pointing to moderation in economic growth in the third quarter.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month also as unseasonably mild temperatures reduced demand for utilities. That followed an unrevised 0.3 percent increase in July.

Last month’s gain in consumer spending was in line with economists’ expectations. When adjusted for inflation, consumer spending slipped 0.1 percent in August, the first drop since January.

The government said the data reflected the effects of Hurricane Harvey. However, it could not separately quantify the total impact of Harvey on the data. It said it made adjustments to estimates where source data were not yet available or did not fully reflect the effects of the storm.

The report was the latest suggestion that Harvey, together with Hurricane Irma, would dent economic growth in the third quarter. The economy grew at a brisk 3.1 percent annualized rate in the second quarter, with consumers doing the heavy lifting.

Harvey, which tore through Texas in late August, has undercut industrial production, homebuilding and home sales. Further declines are expected after Irma slammed Florida in early September.

Economists estimate the storms could slice off as much as six-tenths of a percentage point from third-quarter GDP growth. However, a pick-up in output is expected in the fourth quarter as communities ravaged by the hurricanes rebuild.

Inflation remained benign last month. The personal consumption expenditures (PCE) price index excluding food and energy rose 0.1 percent. The so-called core PCE has increased by the same margin for four straight months.

As a result, the annual increase in the core PCE price index slowed to 1.3 percent after advancing 1.4 percent in July. That was the smallest year-on-year increase since November 2015. The core PCE is the Federal Reserve’s preferred inflation measure and has a 2 percent target.

The U.S. central bank signaled last week it anticipated one more interest rate increase by the end of the year. On Tuesday, Chair Janet Yellen said the Fed needed to continue gradual rate hikes despite uncertainty about the path of inflation. It has increased borrowing costs twice this year.

Harvey also probably impacted on income in August.

Personal income rose 0.2 percent last month after increasing 0.3 percent in July. Savings fell to $522.9 billion in August from $524.8 billion in the prior month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Venezuela’s monthly inflation rises to 34 percent: National Assembly

By Girish Gupta and Corina Pons

CARACAS (Reuters) – Venezuela’s monthly inflation rate jumped to 33.8 percent in August, with food price rises reaching hyper-inflationary levels above 50 percent, the opposition-controlled National Assembly said on Thursday.

The government stopped releasing the data more than a year ago amid a deep economic crisis, but the National Assembly has published its own figures since January. They are generally in line with private economists’ estimates.

The latest month-on-month inflation figure was a jump from the 26 percent rise in prices reported in July.

In the first eight months of 2017, prices rose a cumulative 366.4 percent, according to the legislative body.

“Food is now in hyperinflation,” said opposition lawmaker Angel Alvarado, adding that the food sector had seen price rises of 51 percent in August.

Economists usually define hyperinflation as occurring when monthly rates exceed 50 percent.

Millions of Venezuelans are suffering from food and medicine shortages as the oil producer struggles with an economic crisis that spurred months of nationwide unrest earlier this year.

However, the protests have died down in recent weeks, with many in the opposition viewing them as fruitless after socialist President Nicolas Maduro’s government sidelined the National Assembly and created its own legislative superbody.

‘ECONOMIC WAR’

The country’s bolivar currency also weakened past 20,000 per dollar on the widely-used black market on Thursday for the first time. It has lost 95 percent of its value against the U.S. currency in the past year.

The value of $1,000 in local currency purchased when Maduro came to power in April 2013 would now be worth $1.20.

Maduro blames the crisis on the country’s opposition and the United States, whom he says are waging an “economic war” against his government.

Critics blame Maduro’s economic policies including a currency policy that pegs the bolivar at 10 per dollar at the strongest rate and the strict price controls which they say disincentivize production.

Opponents also point to a rapidly rising money supply. The country’s M2 figure is up 431 percent in the last year alone.

The exponential rise in M2 – the sum of cash, together with checking, savings, and other deposits – means an exponential rise in the amount of currency circulating.

Coupled with a decline in the output of goods and services, that has accelerated inflation.

(Writing by Girish Gupta; Editing by Paul Simao)

Venezuela inflation quickens to 248.6 percent in year to July: opposition

CARACAS (Reuters) – Inflation in Venezuela’s crisis-hit economy quickened to 248.6 percent in the first seven months of the year, the opposition-led congress said on Wednesday in the absence of official data.

Economic hardship in Venezuela, where there are severe food shortages, is fueling unrest that has led to over 120 deaths in the last four months.

Various factors underlay the seven-month price rise, including a lack of U.S. dollars in the country, a sharp weakening of the bolivar currency, and political uncertainty, opposition lawmaker Angel Alvarado said.

He noted that monthly inflation was quickening, with the rise reaching 26 percent in July versus 21.4 percent in June.

President Nicolas Maduro’s government has not published official data for more than a year.

Government opponents say Maduro and his predecessor, Hugo Chavez, have wrecked a once-prosperous economy with 18 years of state-led socialist policies ranging from nationalizations to currency controls.

The government says it is victim of an “economic war” led by opposition-linked businessmen.

(Reporting by Corina Pons; Writing by Alexandra Ulmer)

Phone calls, dismissal threats: Venezuela pressures state workers to vote

Venezuela's President Nicolas Maduro waves during a pro-government rally with workers of state-run oil company PDVSA, in Barcelona, Venezuela July 8, 2017. Miraflores Palace/Handout via REUTERS

By Alexandra Ulmer

CARACAS (Reuters) – State workers in Venezuela are receiving frequent phone calls, pressure from bosses and threats of dismissal to ensure they vote in favor of President Nicolas Maduro’s controversial new congress on Sunday.

The unpopular leftist Maduro is pushing ahead with the election to create a powerful new legislature despite four months of deadly anti-government protests in the oil-rich South American nation, which is reeling from food shortages, runaway inflation and violent crime.

Maduro says the 545-seat Constituent Assembly, which will have the power to dissolve all other state institutions, will overcome the “armed insurrection” to bring peace to Venezuela. His opponents say it is a puppet institution designed to cement a dictatorship.

With surveys showing that almost 70 percent of Venezuelans oppose the assembly, the government wants to avoid embarrassingly low turnout in a ballot being boycotted by the opposition.

Pressure on state employees is higher than ever, according to interviews with two dozen workers at institutions ranging from state oil company Petroleos de Venezuela SA (PDVSA) to the Caracas subway, as well as text messages, internal statements, and videos seen by Reuters.

“Any manager, superintendent, and supervisor who tries to block the Constituent Assembly, who does not vote, or whose staff does not vote, must leave his job on Monday,” a PDVSA vice-president, Nelson Ferrer, said during a meeting with workers this week, according to a summary circulated within the company and seen by Reuters.

In a video of a political rally at PDVSA, an unidentified company representative wearing the red shirt often worn by members of Maduro’s Socialist Party shouted into a microphone that employees who do not vote will be fired.

“We’re not joking around here,” he says.

Workers recount a laundry list of pressures: text messages every 30 minutes, phone calls, mandatory political rallies during work, requests that each worker enlist 10 others to vote, or orders to report back to a “situation room” after voting.

While it remains difficult to estimate how many of Venezuela’s 2.8 million state workers will vote, most interviewees said a significant majority probably will, either out of allegiance or out of fear.

Some Venezuelans also said Socialist Party operatives had threatened to stop distributing subsidized food bags to those who did not vote.

“I’ve seen a stream of people crying because they don’t know what to do. There’s so much fear,” said one PDVSA employee, who asked to remain anonymous to avoid reprisals.

Venezuela’s Information Ministry did not respond to a request for comment. PDVSA did not respond to a request for comment about Ferrer’s alleged remarks or wider pressures.

TO VOTE OR NOT TO VOTE?

After a brief coup against him and an oil strike over a decade ago, Venezuela’s late President Hugo Chavez increasingly staffed state institutions with his supporters.

Cheering government employees became fixtures at marches to defend the leftist firebrand’s “21st century Socialism”. PDVSA’s headquarters are still decorated with portraits of Chavez, who died of cancer in 2013.

Critics say unqualified political appointees have sunk the OPEC nation’s oil industry and spurred a brain drain.

Under Chavez’s less charismatic successor Maduro, the bolivar currency has plummeted and dragged down salaries to a few dozen U.S. dollars a month, fomenting discontent among the rank-and-file.

But, with the country of 30 million people submerged in a fourth straight year of recession, many employees stick to their posts because of health insurance, subsidized food or lack of other jobs.

Some employees said they would vote on Sunday to avoid the fate of those fired after a government lawmaker published a list of Venezuelans who signed a petition demanding a recall referendum against Chavez.

“My mother is ill, my wife is pregnant, and if I lose my job I’ll be even worse off than I am now. I need to go vote,” said a worker at Venezuelan steelmaker Sidor.

Other workers have decided to ignore phone calls and lay low on Sunday. Some are gambling that their bosses will be lenient, while others say they have compromising information about corruption or misdeeds that could protect them from dismissals.

A handful say they are willing to risk their jobs to oppose Maduro.

“We’re tired of working and working and still not being able to save. We can’t change cars or fix up our little house, let alone take a vacation,” said the director of a public school, once comfortably in the middle class.

“We’re ready to assume the consequences of not voting.”

(Additional reporting by Mircely Guanipa in Punto Fijo, Maria Ramirez in Puerto Ordaz, Anggy Polanco in San Crsitobal, and Deisy Buitrago and Andrew Cawthorne in Caracas; Writing by Alexandra Ulmer; Editing by James Dalgleish)

Weak U.S. inflation, retail sales data dim rate hike prospects

FILE PHOTO - Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011. REUTERS/Mike Segar

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.

Still, the economy likely regained speed in the second quarter after a sluggish performance at the start of the year. Other data on Friday showed industrial production picked up in June, driven by a surge in oil and gas drilling.

“Today’s reports imply that the Fed will go very slowly normalizing rates, but it also means that businesses will have to really hustle to find ways to keep earnings growing strongly,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Labor Department said the unchanged reading in its Consumer Price Index came as the cost of gasoline and mobile phone services declined further. The CPI dropped 0.1 percent in May and the lack of a rebound in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory.

Policymakers are confronted with benign inflation and a tight labor market as they weigh a third rate hike and announcing plans to start reducing the central bank’s $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

In the 12 months through June, the CPI increased 1.6 percent – the smallest gain since October 2016 – after rising 1.9 percent in May. The year-on-year CPI has been retreating since February, when it hit 2.7 percent, which was the biggest increase in five years.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in June, rising by the same margin for three straight months. The core CPI increased 1.7 percent year-on-year after a similar gain in May.

The Fed has a 2 percent inflation target and tracks a measure which is currently at 1.4 percent.

Financial markets were pricing in a 47 percent chance of a 25 basis point rate hike in December, down from 55 percent before the data, according to CME Group’s FedWatch program.

As a result, the dollar fell, briefly touching a 10-month low against a basket of currencies. Prices for U.S. government bonds rose and stocks on Wall Street edged higher.

Fed Chair Janet Yellen told lawmakers on Wednesday that the recent cool-off in inflation was partly the result of “a few unusual reductions in certain categories of prices” that would eventually drop out of the calculation.

“We expect a little more cautious language from Fed officials on the inflation outlook going forward,” said Michael Hanson, chief economist at TD Securities in New York.

BROAD WEAKNESS

In June, gasoline prices fell 2.8 percent, decreasing for a second straight month. Food prices were unchanged after rising for five consecutive months. The cost of cellular phone services fell 0.8 percent, extending their decline amid price competition among service providers.

There were also decreases in airline fares and prices for apparel, household furnishings, new motor vehicles, and used cars and trucks. But rental costs rose, with owners’ equivalent rent of primary residence increasing 0.3 percent after advancing 0.2 percent in May.

Americans also paid more for hospital visits and prescription medication, as well as motor vehicle insurance.

Low prices are hurting retailers. A second report from the Commerce Department showed retail sales fell 0.2 percent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets.

Sales at restaurants and bars, as well as at sporting goods and hobby stores fell. May’s retail sales were revised to show a 0.1 percent dip instead of the previously reported 0.3 percent drop. Retail sales rose 2.8 percent year-on-year in June.

Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1 percent last month after being unchanged in May. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite two straight months of decreasing retail sales, consumer spending likely gained steam in the second quarter after a helping to restrict economic growth to a 1.4 percent annualized rate in the first quarter. However, that could negatively impact third-quarter GDP.

“The weak trajectory of consumer spending at the end of second quarter adds some challenges to the third-quarter consumption outlook, which reinforces our view that growth will step down modestly in the current quarter,” said Michael Feroli, an economist at JPMorgan in New York.

That was supported by a third report showing a measure of consumer sentiment fell to a reading of 93.1 in early July from 95.1 in June. It has declined from a high of 98.5 in January.

The Atlanta Federal Reserve lowered its second-quarter growth estimate by two-tenths of a percentage point to a 2.4 percent rate following the inflation and retail sales data.

Still, growth in the second quarter likely got a lift from the industrial sector of the economy.

In a fourth report on Friday, the Fed said industrial production increased 0.4 percent in June amid robust gains in oil and gas drilling after nudging up 0.1 percent in May.

Industrial production increased at a 4.7 percent rate in the second quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Venezuela inflation so far this year at 176 percent: opposition

FILE PHOTO - A cashier counts bolivar notes at a butchery in a public market in Caracas, Venezuela January 22, 2016. REUTERS/Marco Bello

CARACAS (Reuters) – Inflation in Venezuela’s crisis-hit economy was 176 percent in the first half of 2017, the opposition-led congress said on Friday in the absence of official data.

Economic hardship in Venezuela, where there are severe food shortages, is helping fuel opposition protests that have led to at least 90 deaths in the last three months.

Various factors underlay the six-month price rise, including excess money-printing by the central bank to fund campaigns for Maduro’s controversial new congress as well as a recent devaluation of the bolivar, opposition lawmaker Angel Alvarado said.

“These levels of inflation and the acceleration of price increases are not only impoverishing Venezuelans, they’re truly fueling hunger,” said Alvarado, an economist.

June’s inflation was 21.4 percent, he added, presenting the latest opposition-calculated index.

President Nicolas Maduro’s government has not published official data for more than a year.

The government says it is victim of an “economic war” led by opposition-linked businessmen.

(Writing by Alexandra Ulmer; Editing by Andrew Cawthorne; Editing by Bernard Orr)

Brazil cuts inflation target for first time in over a decade

Brazil's Central Bank President Ilan Goldfajn looks on during a news conference next to Brazil's Economy Minister Henrique Meirelles and Brazil's Planning Minister Dyogo Henrique de Oliveira in Brasilia, Brazil June 29, 2017. REUTERS/Ueslei Marcelino

By Silvio Cascione and Marcela Ayres

BRASILIA (Reuters) – Brazil’s government on Thursday lowered its annual inflation target for the first time in more than a decade, seeking to turn the page on recent double-digit jumps in consumer prices and bolster investors’ confidence about future economic stability.

The National Monetary Council, comprised of heads of the finance and planning ministries and the central bank, cut the inflation target to 4.25 percent in 2019 and 4.00 percent the following year, from 4.5 percent at present.

The tolerance range was maintained at 1.5 percentage point.

The reduction, predicted by a Reuters poll of economists in January, followed a plunge in annual inflation from nearly 11 percent in early 2016 to 3.6 percent in June.

A stronger commitment to low inflation could boost Brazil’s long-term growth by reducing investor uncertainty, without closing the door to further interest rate cuts by the central bank this year, economists said.

Economists forecast an inflation rate of 3.5 percent for 2017, breaking a sequence of seven straight years of Brazil overshooting its target. Under the administration of former President Dilma Rousseff, who was impeached last year, economists accused policymakers of pursuing the ceiling of the goal and not its midpoint in order to avoid rate hikes that could hurt growth.

“Economic policy has all the necessary conditions in terms of inflation, transparency and credibility to remain committed to these inflation targets,” central bank chief Ilan Goldfajn told journalists.

Yields <0#DIJ:> on longer-dated interest rate futures slipped in early trading, suggesting investors saw the new targets as consistent with forecasts of interest rate cuts. Global risk aversion pushed yields up again later in the day, traders said.

Growing investor optimism about Brazil’s economic prospects contrasts with an escalating political crisis that threatens to remove President Michel Temer from office.

Goldfajn said the targets took into account the political environment, and also responded affirmatively when asked if he expected to stay in his post even if Temer is suspended from office should the Supreme Court try him on corruption charges. Temer appointed Goldfajn to lead the central bank last year.

The central bank has been expected to cut its benchmark rate to 8.5 percent by December, from 10.25 percent currently, according to a central bank survey of economists released on Monday. The bank has already lowered the benchmark rate by 400 basis points since October.

Before the decision was announced, economists had been forecasting an annual inflation rate of 4.25 percent for the years of 2019, 2020 and 2021, according to the central bank.

“Expectations will probably start to converge toward the new target as soon as next week,” said Gustavo Arruda, an economist with BNP Paribas.

Brazil began targeting inflation in 1999, with the 4.5 percent target being first adopted for 2005.

Goldfajn had long said Brazil should aim for a target more in line with other emerging markets. Latin American countries such as Mexico and Chile target inflation at 3 percent.

(Reporting by Silvio Cascione and Marcela Ayres; Editing by W Simon and Daniel Flynn)

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