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Brazil's Central Bank Continues Rate Cuts Amid Political Uncertainty

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Reuters

BRASILIA, June 1 Brazil's economy emerged from its worst recession on record with its fastest growth rate in almost four years, government data showed on Thursday, in some good news for President Michel Temer as he battles a corruption scandal. Overall in 2015 and 2016, the economy dropped 3.8 percent, then 3.6 percent.

But that narrative is being undercut by a corruption crisis that threatens to bring down Temer and cast the country's political class into ever greater turmoil.

Brazil's economy finally emerged during the first quarter from its worst recession on record, as record harvests and growing exports outweighed shrinking consumer spending and business investment. The industrial sector grew 0.9 percent, while services were flat - something of a victory in itself. Economists had predicted 2.3 percent fall.

Temer has previously declared an imminent end to the recession, citing forecasts predicting that 2017 will close with about 0.5 percent growth. The reforms, which Temer says will impose fiscal discipline, are unpopular with ordinary Brazilians but backed by the markets.

There was another piece of good news on Wednesday, when unemployment figures showed a slight dip to 13.6 percent rather than yet another record rise.

The IBGE state statistics office said that 14 million people were out of work in April period, or 13.6 percent of the workforce.

The Monetary Policy Committee (Copom) however noted that the increasing uncertainties regarding the political climate and the slow rhythm of reforms to be approved by Congress may lead to a slower reduction in the Selic rate cut rate during the upcoming meetings.

Temer, who rose to power after the 2016 impeachment of his running-mate Dilma Rousseff, has resisted pressure to resign amid accusations he took bribes from the billionaire owners of the world's largest meatpacker JBS SA JBSS3.SA .

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