Bank of Brazil Implements another Rate Increase as Expected

October 9, 2013

The Brazilian Selic rate, which was cut by 150 basis points in the second half of 2011 and 375 bps in 2012, was lifted in each of the past meetings of Copom, the Bank of Brazil’s policymaking committee.  The first move was by 25 bps, while the last four including today’s amounted to 50 bps each.  The Selic rate will be at 9.5%, highest since March 2012, until the next meeting scheduled for November 27.

Brazil is battling stagflation.  CPI inflation of 5.9% lies at the high end of the 2.5-6.5% target and is being fed by real depreciation.  The IMF doesn’t projects growth of only 2.5% this year and next.  There is concern that inflation could creep higher, and investors believe that the central bank is not through tightening its monetary policy stance.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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